New a2 Milk CEO to join in 2021

Recruit to receive $A5m on arrival as compensation for loss of existing benefits.

By NBR staff

Tue, 11 Aug 2020

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Incoming a2 Milk managing director David Bortolussi

Milk marketer a2 Milk has announced the appointment of David Bortolussi as chief executive and managing director, replacing interim boss Geoffrey Babidge.

Bortolussi will join a2 early next year from his current job as group president, international innerwear at HanesBrands.

A2 chair David Hearn said the board was delighted to have secured Bortolussi.

“David has demonstrated significant skill in guiding businesses through periods of significant growth whilst also effectively managing the changes that expansion frequently requires.

“The a2 Milk Company is going through a period of continued strong growth in dynamic markets and David’s skillset and comprehensive strategic and operational experience will serve the company well. I am looking forward to working with David as we navigate these challenges together with the board and management team.”

Bortolussi will be paid a fixed salary of $A1.75 million ($1.9m), plus short and long-term incentives.

He will also get a cash payment of $A1.27m and $A3.7m of share rights on joining a2 to compensate him for losing vested and unvested incentive pay from his current job.

A2 said none of the shares can be sold except to meet tax obligations until Bortolussi has enough shares to meet the minimum shareholding requirement.

The minimum holding is shares equivalent to the executive's total fixed annual remuneration.

Hearn said the contractual requirement to hold the stock was put in place to avoid last year's controversy when then-CEO Hrdlicka sold shares provided in a similar compensation arrangement.

"It was a mistake last time frankly that we didn't agree that up front," said Hearn.

However, Bortolussi had no desire to sell the stock anyway so it was easy to include the restriction in his contract.

Hearn said Bortolussi could not join A2 earlier because he had a six month notice period in his contract and HanesBrands had just hired a new group CEO, Stephen Bratspies, who was keen to keep his current executives in place while he got his feet under the table.

Babidge has been acting managing director since December last year, when incumbent Jayne Hrdlicka agreed to step down from the role.

Hearn said Babidge was happy to continue until Bortolussi came on board.

"It's been a fantastically good thing [to have Babidge as interim CEO]. It means the company hasn't missed a beat."

A2 said Bortolussi joined Pacific Brands in 2009 as chief financial and operating officer, taking over as CEO in 2014, “during which [time] he restructured and transformed the business into a brand-focused, leading omni-channel retailer with successful wholesale partnerships, delivering double-digit compound annual growth in sales and earnings over the past five years”.

When HanesBrands bought Pacific Brands in 2016 it expanded his role to cover Australasia and subsequently its international innerwear operations outside of the Americas.

Before Pacific Brands, Bortolussi was at brewer Fosters Group where he was chief strategy officer.

“In this role, David was instrumental in leading the process that ultimately led to the operational separation and demerger of the domestic beer and global wine businesses, generating significant shareholder value,” a2 Milk said.

Bortolussi is a former consultant with McKinsey and PWC.

According to filings with the US Securities & Exchange Commission, quarterly revenue for the HanesBrands Innerwear division increased 61% compared to the same period a year earlier, driven by $US614m in net sales of protective gear for the Covid-19 pandemic.

Revenue for the three months to June 30 was $US1.09 billion, up from $US678.6m in 2019.

HanesBrands said the increase "was partially offset by a 55% and 21% decline in net sales in our intimate apparel and basics businesses, respectively, primarily as a result of the negative impact of the Covid-19 pandemic. In addition, the exit of the C9 Champion program at Target and the DKNY Intimates licence in 2019 represented an approximately $21 million decrease in net sales in the second quarter of 2020 compared to the second quarter of 2019."

Operating profit for the quarter was $US304.5m, up from $US149.5m in the previous corresponding period.