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SPECIAL INVESTIGATION: Nigerian Breweries: Starving Investors To Overfeed Directors

BEVERLY HILLS, April 11, (THEWILL) – A curious twist in the annual reports of some Nigeria’s quoted companies for the 2020 financial year was that they jerked up the emoluments of their directors.  This occurred in a year that businesses were faced with insalubrious operating environment occasioned by   COVID-19 which knocked life out of many firms, while others walked a tight rope to survive.

As would be expected, revenues dipped while anticipated opportunities failed to materialise. Investors received little or no dividend. Jerking up directors’ remuneration in such a foggy mix should be in the bottommost layer of corporate priority. But that was not the case with Nigerian Breweries Plc which jerked up their directors’ emolument in the COVID-19 year amidst low profit and little or no dividend for the shareholders.


When the shareholders of Nigerian Breweries Plc converge on the Lagos venue of its 75th Annual General Meeting (AGM) later this month (April), one knotty issue to resolve will be the astonishing raise in the Directors’ remuneration at a time the company is battling to recover from the devastating effects of COVID-19.  The board will certainly do extra work to convince likely agitated shareholders on the justification for the 25.2 per cent raise in Directors’ earnings while the investors receive paltry dividend.

The 74-year-old foremost brewer was not spared the gash of the COVID-19 restrictions and the 15-months land border closure imposed by the Nigeria government. These combined to hit its operations badly, leading to huge decline in profit and dividend for the shareholders. While it managed to weather the storm, albeit at a huge cost, the jump in the Director’s remuneration to N702.537 million from the N561.245 in 2019 will need more explanations, particularly, when corporate leadership across industries are accepting pay cuts.

A look at the Nigerian Breweries audited 2020 financial statements showed that the company spent a total of N702.537 million as Directors’ emoluments compared to N561.245 million in the preceding year, representing 25.2 per cent raise.

Virtually all the emolument components showed an increase in their sub-areas: Chairman’s fees and other emoluments rose to N18.172 million in 2020, from N16.552 million in 2019, representing 9.8 per cent jump. This excludes reimbursable expenses for the Chrisman’s office which dropped to N17.7 million in 2020 from N37.1 million in the preceding period, representing 52.3 per cent.

Fees and emoluments of other Non-executive Directors jumped from N85.887 million in 2019 to N107.531 million in 2020, a spike of 25.2 per cent.

According to the report, the emolument (excluding pension contributions) of the highest paid Director jumped to ₦379.386 million in 2020 from ₦270.542 million in 2019, or 40.23 per cent.

Further details of the report showed that 8 Directors earned between ₦4,000,001- ₦30,000,000 as against 9 in 2019; while 3 earned 30,000,001 and above as against 2 in 2019.

The company recorded a profit after tax of N7.5 billion in 2020 as against N16.10 billion in 2019.  The 2020 profit and dividend are the least in decades of its operations occasioned by the COVID-19 lockdown, restrictions and the prolonged land border closure. The N7.5 billion dividend which translates to 94 kobo per share as against N1.51 per share paid in 2019, is the lowest dividend paid its shareholders in about 15 years.

The 2,990 employees (3,102 in 2019) of the company were compensated with emolument raise of N3.3 billion resulting to N16.7 billion from N13.4 billion in 2019, suggesting that the management also looked their way while the Directors’ remunerations were being considered for a lift.

Dimmed prospect was expressed when the Board of Directors of Nigerian Breweries released the company’s results for the nine-month period ended September 30, 2020 which showed a 0.7 per cent decline in net revenue from N235.7 billion in September 2019 to N234 billion in 2020.

The company explained that the marginal decline was attributable to various environmental and regulatory factors such as an increase in Excise Duty, a rise in inflation, an increase in VAT from 5 per cent to 7.5 per cent and most importantly, the severe impact of the COVID-19 on businesses globally.

A statement signed by the Company Secretary/Legal Director, Mr. Uaboi Agbebaku, said the company will continue to focus on efforts to mitigate the impact of the pandemic on its operations, while protecting the health, safety and welfare of employees, customers and partners. The move seems to have achieved the result as sales recorded a boost at full year.

Notwithstanding,  the COVID-19 challenges of lockdowns and restrictions during most part of 2020, Nigerian Breweries recorded impressive revenue of N337 billion compared to N323 billion in 2019, representing 4.3 per cent rise. Analysts attribute this to strong brand loyalty which earned it continued patronage even at the peak of the COVID-19 lockdown and restrictions.

Stakeholders and industry experts who spoke to THEWILL expressed divergent views about the raise in the remunerations of the Nigerian Breweries amid  negative impacts of COVID-19.

The National President, Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, was both sympathetic and optimistic towards Nigerian Breweries, a firm he described as “strong players in the economy with the culture of regular dividend payment to shareholders even in difficult times”.

Okezie said the hike in the Directors’ emoluments may be the result of accumulated entitlements to retiring Directors of the company.  He also praised the brewer for recognising the sacrifice of the staff during the COVID-19 restrictions by approving a raise in their entitlements.

“Nigerian Breweries experienced challenging times during the COVID-19 restrictions which affected the circulation of its products to hotels, beer parlous, events and other outlets because of the lockdown.  This must have affected their revenue severely with low profit and low dividend for the shareholders compared to the previous year.

“As for the raise in Directors’ emolument, this could be because of retiring Directors whose accumulated entitlements had to be settled.  And for the raise in the staff pay, I think they deserve it because they worked hard and made a lot of sacrifice to keep the company running during the COVID-19 lockdown and restrictions.

“I am aware that Nigerian Breweries made handsome donations as palliatives last year to cushion the effects of COVID-19, which is commendable.  As for the drop in dividend, I would advise the shareholders to be patient knowing that the company passed through a rough time during the period,” Okezie told THEWILL in a telephone chat.

An investment analyst, Benson Obaigbon did not hide his feelings about the raise in the Directors’ remunerations in a year that other executives took pay cuts among other sacrifice. “No matter the reason, the Board and Management of Nigerian Breweries should not consider any pay rise at this time because the cake had been reduced and needed to be re-baked before sharing it.

“The jump is on the high side.  The company should have maintained the figure it recorded in the previous year if it has so much money. This is not the time for such largesse, particularly when the shareholders are getting peanut”, Obaigbon said in a note to THEWILL.

The Nigerian Breweries management explained that their Directors’ remuneration was not jerked up as being reported.  The Head of Communications, Mr Uchenna Ibemere, said the higher figures occurred because of foreign exchange variations which affect the emolument of the company’s expatriate directors whose entitlements are denominated and paid in foreign currency, especially in Euro. Ibemere also disclosed that “the Directors made huge sacrifices at the peak of  COVID-19”, adding that companies with expatriate Directors had similar experience in the payment of their emolument.

In a note signed by Nigerian Breweries’ Corporate Affairs Director, Sade Morgan and made available to THEWILL, the company denied insinuations that its Directors got a big pay boost amid COVID-19, adding that the salary emolument of the company’s Directors, like in other multinationals, are benchmarked in their home country currency.

The statement further explained that the appreciation in the naira value of the expatriate Directors’ salary was largely due to the devaluation of the naira, “a factor over which we have no control”, adding that this applies to the “top management team members of the board of directors who are expatriates.”

‘In addition, the Financial Statements clearly showed that the total remuneration of Non-Executive Directors paid out in 2020 was lower than that of 2019.

“Indeed, it is common knowledge within the Company that our Managing Director and other senior management staff took the unprecedented action of forfeiting their short term and long-term incentives, with some executives also donating a percentage of their salaries towards supporting the company’s COVID-19 efforts in 2020.

“We wish to stress that as a publicly listed company, we are readily available to provide clarification to the media, and we urge them (in the interest of fairness, impartiality and neutrality) to always contact the company’s representatives on such matters.

“In conclusion, we wish to reassure our shareholders, customers, staff and the general public, that Nigerian Breweries remains well-positioned to continue to deliver return on investment, as well as protecting the health, safety and welfare of our employees, customers and partners.”

Nigerian Breweries is among the firms at the forefront of promoting Nigeria’s backward integration policy which emphasizes local sourcing of raw materials.  Its support to farmers in the areas of sorghum and cassava plantations has helped in boosting local supply of these commodities across the country.  The decision by Nigerian Breweries, a Heineken subsidiary, to use locally grown sorghum in beer production in 1988 led to a catalyst for the creation of an industrial market for sorghum.