Australia’s Richest 250: billionaires share their lessons learned

Australia’s top three billionaires talk to The List about the key moments of their business careers.

Harry Triguboff. Picture: Nic Walker.

It was the moment when Gina Rinehart’s record-breaking $US7.2 billion debt package for her Roy Hill mine almost didn’t happen. Anthony Pratt harks back to a $US40 million acquisition that helped catapult sales from $US300 million to $US4 billion. Harry Triguboff talks about the need for speed. “Keep moving forward and do everything at pace,” says the apartments king.

The three billionaires – the top three in The List: Australia’s Richest 250 with a combined wealth of almost $50 billion – are talking to The List about the key moments and decisions they made during their respective business careers, which add up to more than 100 years of combined corporate knowledge. The secrets of their success, the tips for aspiring entrepreneurs that could help them avoid some of the pitfalls and ups and downs in business. The lessons they have learnt during their time at the top.

There are always turning points or strategies in an entrepreneur’s journey towards success. The deal that catapults a company forward, the idea that when turned into reality is suddenly worth hundreds of millions of dollars. Or a critical decision that heads off disaster.

Gina Rinehart today oversees a mining giant that is exporting about 60 million tonnes of iron ore per year from its massive Roy Hill iron ore mine and is well on its way to paying off its debts earlier than she had imagined. There have been debt deals done by Australian companies, and there the was the complex $US7.2 billion package Rinehart put together in 2014 to help fund her long-held dream to develop Roy Hill in Western Australia’s Pilbara.

“There were 19 major banks involved; 11 of them were the world’s biggest,” she tells The List. “We also had five [export credit agencies]. One of the things that was courageous was that we used our equity money. Usually you don’t use your equity money until you’ve got your project finance organised. We didn’t. But we wanted to get it started because the markets were good, so we convinced our partners as well to use our equity money.”

But what is little known is that Roy Hill, which has performed spectacularly well and shown Rinehart to be a true mining entrepreneur, almost didn’t happen. So close did she come to having to pull the pin on the huge project that she had drawn up documents to bring work there to a halt.

Anthony Pratt and Gina Rineart. Picture: Nic Walker.

“One of the four major contractors we used went under, on the [mine’s] preparation plant,” she says. “That delayed the financing, and during that delay we actually had to draw up closure plans for Roy Hill. It is true; Roy Hill almost never happened. We got that close. We were running out of money.” 

Was she nervous? “You could say. I’d never had $US7.2 billion on my back before. It was quite something.”

But Rinehart says that moment wasn’t even the most significant turning point for Hancock Prospecting. That came back in 2005, when she and her staff raced against time to put a document together she says the company’s very future depended on.

It was a time when Hancock was still small, saddled with debts and nowhere near the size it is today. It had the Hope Downs iron ore mine, but a change of partners ensued after South African firm Kumba was taken over by Anglo-American, which promised to concentrate more on African projects. 

There were several other issues, including arbitration and government changes to port access, and Rinehart also changed joint venture partners to Rio Tinto in mid-2005.

This led to a quick dash to a June 30 deadline for Hancock to submit a timely Bankable Feasibility Study to the state government so that the company could continue with its agreement to keep the area earmarked for the mine.

Rinehart says she had done one Bankable Feasibility Study regarding Rio Tinto, and the deadline loomed for a financeable development proposal to be submitted to the state government for its approval. 

“We had to change our whole BFS, because our BFS was to go out through Port Hedland and there were a whole lot of issues there. So our BFS, which we’d spent tens of millions on, we had to change because our infrastructure was changing as we were going with Rio. 

“There had been many nights without sleep. I hadn’t had a weekend off for six months, the days were huge and we were lucky to get three or four hours sleep per night, in order to get the documents in. 

“I remember the revised financeable development proposal was still hot when we got it to the relevant government minister. It was on the day – it was after hours and a little bit after we were meant to – but we got it in on the due day. It was June 30, and it was hot from the Xerox [photocopier] still. It was a game changer. It changed our tiny little company.”

Pratt says a similar thing happened to him in America, where he had been sent by his late father Richard to grow the family company. It took plenty of hard work – Pratt says his Pratt Industries lost money for its first 14 years – and some good timing for him to finally make a success in the biggest market in the world.

“We bought a company back in 2005 called Love Box, run by the Love family in Wichita, for about $US40 million,” he says. “Our sales at that time in America were about $US300 million. That led to a series of domino effects that caused us to go up to $US4 billion. 

“That deal was a strategic inflection point. The industry had collapsed, about 100 paper mills had closed down over 10 years because the industry had over-capacity. Love Box ... were very high cost; they were too big to be niche and they were too small to be efficient. So they went under.

Anthony Pratt. Picture: Nic Walker.

“We had a relationship with them and we were fortunate enough to buy them. And two months after we bought them the market turned and we were away.”

Pratt Industries and Visy today have a combined $7 billion annual revenue and Pratt is pushing for that to hit $10 billion within six years. He says an important lesson for aspiring entrepreneurs to draw from his experience is the need for patience and perseverance.

“Anyone who thinks they can do it faster than that, that’s great, but most people would not assume it would take 14 years of their life. Patience is very important. Just don’t give up. Just keep going.”

Rinehart agrees, saying perseverance and persistence are critical, and “you should also carefully consider if you want to maintain a work/life balance, as starting and protecting your company needs your time and attention 24/7”.

Triguboff says that people who want to run their own business should obviously to go into an industry where they have a good chance of success. But there is also a need to pick something they really like and want to do, a sector in which they have a real interest.

“Don’t just chase the latest sector that is hot and people are making lots of money in,” he says. “It won’t last. You have to do something that you really have a passion for, otherwise you won’t keep going with it. And when you’re in that industry, stick to it. Don’t let distractions make you go off to do other things. I think that is very important.

“The other really important thing is to make sure there are really good people around you. They have to have the same interest as you, so you can grow together and stay together.”

Staying together and keeping a business intact is, Triguboff stresses, something that should be non-negotiable. As is keeping a company private, a view both Pratt and Rinehart share.

Pratt says he wants Visy in Australia and Pratt Industries in the US to stay intact and remain with his family.

“You know at the end of the day your legacy is not the philanthropy you give or the factories you build – it is the family you choose,” he says.

Triguboff says he learnt his lesson back during the Whitlam Government years, in the early to mid 1970s, when a credit crunch hit. Before that, he says, he had at times struggled to obtain financing from local banks, which he says were too conservative. Instead, his Meriton apartments business was a big beneficiary of the decision by big US companies such as Citibank to enter the Australian lending market.

It was a great relationship until the credit crunch hit. Suddenly financial institutions were calling in debts and demanding property developers like Triguboff start selling off assets at what could have been fire-sale prices.

Triguboff remembers talking to a Scotsman called Andy Davidson at Citibank, asking him what advice he had. “I said, ‘Scotsman, what do you think I should do?’ He said ‘Harry, make sure you keep your company together’. So that is what I did.

“I managed to keep everything together. I managed to get through it, and I have kept everything all together ever since. The lesson is keep it all together as much as you can and stay in control as much as you can.”

Keeping everything together and staying private and in control leads to Triguboff’s next lesson: having the ability to move as nimbly as possible in changing markets. Having a strong balance sheet and making all the decisions has allowed him to capitalise when other developers have had to sell good land at relatively cheap prices – a manoeuvre Triguboff has mastered.

“The best thing in business I think is speed,” he says. “It is having the ability to move quickly and make decisions quickly. Keep moving forward and do everything at pace. You might make mistakes, but moving fast means you can recover. So it is about not standing still and making sure you keep moving all the time. That way things won’t catch up to you.

“If you make decisions quickly you stay ahead of other people in the market, and you can move quickly to buy land and other things when maybe your competition hesitates.”

Rinehart agrees with Triguboff, saying that moving rapidly was critical in Hancock’s $390-million takeover of Atlas Iron last year and a metallurgical coal project in Canada.

As for what the future holds in his industry, Triguboff forecasts a big shift in the way Australian cities operate. He can already see that in Sydney, and for some time has been buying and developing more of his apartments beyond the previous close radius to the CBD – a strategy he will accelerate into the future.

“What I think you will find happening is there will be a shift towards having smaller centres or cities around somewhere like Sydney,” he says.

“It will be less centralised, and it will help people who will have jobs in these places and won’t have to travel so far to the CBD. And it will also help them buy places because it will not be as expensive as it is closer to the CBDs now, where it can be very difficult for buyers.

“We already have somewhere like Parramatta, where there has been a lot of activity and it has really been built up. Then you’ll have somewhere like Liverpool [in the southwest], and maybe Hornsby or somewhere in the north, I don’t know. It will change the way people live.”

Pratt says there are several trends that will unfold in his industry in the next decade, including the continuing rapid shift to online retailing. Given that so much gets delivered in cardboard boxes, he stands to benefit. But technology will also help smaller retailers customise boxes for their clients – for example, upscale restaurants will be able to deliver quality cooked meals in specially made boxes, and a small number of boxes could be custom printed for birthdays and special events.

There is also the ongoing shift towards converting waste to energy, which Pratt has pioneered in his industry in the US. The importance of this hit home for him when he had US President Donald Trump open his new Ohio mill last September.

 “One of the things that President Trump said when he came to my paper mill, with Prime Minister [Scott] Morrison, was ‘you mean you make paper out of garbage?’ I said ‘yes, sir’ and he said ‘that’s amazing!’.

“It went straight to the nub of the unique thing we have done in America. Over there, 80 per cent of the corrugated boxes are made from trees, whereas in Australia – and what we brought to America – is that 80 per cent is made out of garbage. That ability to turn garbage into a useful commodity is both cheaper and sustainable. 

“We have also set up four clean energy plants, so what can’t be turned into packaging from the garbage can be recycled back into energy. That is going to be a big trend in the future, clean energy.”

As for Rinehart, she says the mining sector will have to continually battle costs, given that it must export into the international market and retain its cost competitiveness to be successful, and must also retain its reliability. She says operating costs in mining are largely government related taxes and red tape, plus electricity and fuel, and wages. 

“This big slab of government fat, tape and taxes, is a huge problem, a problem for our international cost competitiveness, upon which our export industry must focus. Unless something happens there, and I would hope for significant reductions in both, all we can do is continue to flock off shore, as companies are doing, or keep trying to reduce our costs, and encourage the government to cut its onerous burdens.

“We are investing in more solar, more electric vehicles, more automation, and encouraging our staff to cut their usage of electricity and fuel, for instance. Our [mining accommodation] dongas are fitted with clotheslines on their verandas, to save the usage of driers.

“So endless cost reduction is in our future if we are going to compete internationally, because we have to be internationally cost competitive and reliable to secure our markets, which markets provide the revenue to pay our salaries, suppliers and government, and provide money for further investment, which Australia needs.”