Treasurer Perspectives - Uri Gordon, Incitec Pivot

What are the biggest challenges you’re facing these days?

Uri Gordon (UG): For treasury, the biggest challenge is capital management. Last year here in Australia, many companies raised equity, only to find themselves 18 months later in a healthy position and having to decide how to use that cash. The question now is whether to chase strategic growth opportunities, given that multiplies are high, or to do a share buyback.

What opportunities are you looking to pursue over the next 12 to 18 months?

UG: Optimisation is key. Earlier this year we did a bond buyback exercise to discharge long-term bonds, because we figured out that we did negative carry, so it was better for us to buy back. That was around showing that the negative carry that you get from holding cash at zero from the bank isn’t hurting you too much. It’s all about how to deploy our returns effectively.

How do ESG factors play into your role?

UG: In March 2021, we converted all our bank facility into a sustainability-linked loan. It was an interesting process where we had to ensure our KPIs weren’t simply “greenwash” labels but were challenging us to drive positive changes. We thought, we can either be proactive and show leadership and commitment to ESG and do it now of our own accord or in three to five years when the industry forced us to.

This trend is gathering momentum – before we know it, banks will demand it as standard. We are starting to have more conversations with financiers around our customers’ carbon emissions and our own indirect omissions, not just our direct ones, and how we’re trying to reduce them.

In terms of resource allocation, what are you focusing on? Is tech becoming increasingly important? Are you still very much a people-based business?

UG: For treasury, we’re definitely still focusing more on people. We believe it’s people that enable our development and investment in technology. Half our company is in Australia and half in the US, and both economies were affected severely by the pandemic. We had to be able to work from home continuously, but the technology investment to achieve that ultimately wasn’t that significant, and our basic treasury management and cloud systems allowed us to operate.

In terms the relationship between treasury and the CFO, how does your organisation balance the pursuit of gross growth while mitigating risk?

UG: We’re very lucky that, ever since we got our external credit rating, our board became committed to that investment grade. There’s even more discipline around our growth agenda. We have regular conversations, at least once a year, with the board where we remind them of that commitment. We emphasise how much room we have within the debt part of the book to allow for organic or inorganic growth, versus how much equity you would need before we start risking our credit rating. Again, we are very lucky. Treasury, the CFO, the CEO, the board – we’re all on the same page.

Uri Gordon is Deputy General Manager, Treasury, of Australian chemical company Incitec Pivot.