Drink to that! EABL boss, CFO toast to staggering Sh186.9m pay

Kenya's insatiable appetite for alcoholic drinks saw giant East African Breweries Ltd (EABL) top executives smile all the way to the bank in the full year to June this year.

EABL has revealed its Group Chief Executive Jane Karuku and Group Chief Financial Officer Risper Ohaga took home annual gross compensation of Sh186.9 million for the year ended June this year as the company pulled out all the stops to retain top talent.

The giant brewer, controlled by Britain's Diageo and which is known for its flagship Tusker beer brand, says the compensation package was Sh50 million more than the Sh136.9 million Ms Karuku and Ms Ohaga took home a year earlier. According to the EABL public disclosures, Ms Karuku took home an annual gross pay of Sh126.3 million on the back of higher bonuses, salaries and allowances, making an attractive compensation package.

This was Sh40 million more, or an increase of 46.34 per cent, compared to the Sh86.3 million she got a year earlier. EABL is majority-owned by London-listed Diageo, the world's biggest drinks group.

Safaricom - the region's most profitable company - is another blue-chip entity that has gone all out to retain top talent, spending millions of shillings to keep its executives happy.

Chief Executive Peter Ndegwa and the giant telco's executive directors took home annual gross compensation of more than Sh500 million for the year ended March this year.

The compensation package of Sh534 million was Sh62 million more than the Sh471 million Mr Ndegwa and the board took home a year earlier, Safaricom said in its filings. Mr Ndegwa took home an annual gross pay of Sh313.11 million on the back of higher bonuses and an attractive compensation package, filings by Safaricom show.

This was Sh24 million more, or an increase of 8.37 per cent, compared to the Sh288 million he got a year earlier.

This is as the chief executives of Kenya's top six banks took home annual gross pay of Sh807 million last year, as the banks recorded higher profits.

The bosses of Kenya's tier-one lenders Equity, KCB Group, NCBA, Diamond Trust Bank (DTB), Standard Chartered Kenya (Stacnchart), and Absa smiled all the way to their banks on the back of bonuses and attractive compensation packages.

KCB Group Chief Executive Paul Russo was one of the top earners, taking home an annual gross pay of Sh217.4 million. Mr Russo, who took the reins of KCB on May 25 last year, earned an annual salary of Sh72.7 million, bonus in cash and deferred of Sh99.3 million and Sh24.8 million respectively as well as allowances and gratuity of Sh5.8 million and non-cash benefits of Sh2 million.

Equity Group Chief Executive James Mwangi took home an annual compensation of Sh213.6 million. This included an annual salary of Sh106 million or Sh8.8 million per month, a bonus of Sh53 million, a gratuity of Sh31.8 million and leave pay of Sh8.3 million.

Meanwhile, according to EABL's disclosures, Ms Karuku's bonuses grew the fastest after more than doubling by Sh36 million to Sh66.8 million in the period, from Sh30.8 million a year earlier. Her salary also recorded a jump of 7.19 per cent by Sh3.3 million to Sh49.8 million. This was an equivalent of Sh4.152 million a month. Ms Karuku also benefited from higher allowances and benefits, which rose by Sh666,000 to Sh9.6 million.

Ms Ohaga at the same time saw her annual compensation jump by Sh10 million to Sh60.6 million in the period on the back of higher salary, bonuses and allowances. This comprised an annual salary of Sh28.8 million (up from Sh26.5 million in 2022), a bonus of Sh25.6 million (Sh18.3 million in 2022) and benefits and allowances of Sh6 million (Sh5.6 million in 2022).

Like other Kenyan corporates, EABL, which is struggling to retain and protect its massive revenues, has been pulling out all the stops to keep its top managers and board members happy. Blue chip company CEOs often enjoy packages, including luxury holidays, wardrobe allowances, car and personal drivers, bodyguards, private club membership, housing, entertainment allowance, and elite school fees benefits for their children.

"(We) provide market competitive benefits which help in attraction and retention of top talent," says EABL on its compensation policy. "The range of benefits includes car allowance, club membership, company product, medical, accident and life insurance."

EABL also pays its top executives, bonuses which are awarded annually and paid out in cash in October of every year. "Elements used to calculate bonuses are annual base salary, business multiple and bonus factor based on individual and company performance," explains EABL. The ongoing cost of living crisis in the country is affecting Kenyans' intake of their favourite drink in a sector that has long been considered to be immune to recession.

The economic crisis has prompted Kenyans to drown their sorrows in cheap liquor instead of more expensive beer, hurting EABL revenues. During economic weakness, consumers tend to drink at home where it is cheaper versus at a bar or a restaurant and trade down for more affordable products.

EABL revealed earlier its net profit dropped by Sh3.2 billion in the full year to June on the back of higher taxes and input costs, and as price-sensitive and broke consumers shunned their favourite drink. EABL saw its net earnings decline 20.8 per cent to Sh12.3 billion in the full-year period to June this year from Sh15.5 billion booked in a similar period in 2022.

The brewer said volumes were down seven per cent year-on-year as inflation and higher taxes afflicted the brewer by reducing consumers' purchasing power even as input costs jumped due to the high costs of ingredients.

Net sales in Kenya declined four per cent, with excise tax escalation impacting the price-sensitive mainstream segment."The trading environment in Kenya also impacted performance, particularly trade distractions leading to county-led bar closures," said EABL.

Following the lower performance and the gloomy outlook, the Nairobi Securities Exchange-listed firm slashed its dividend by more than half to Sh5.50 per share, lower than the Sh11:00 paid out in the same period last year in a financial blow for its shareholders.

Non-essential items

The rise in the cost of essential commodities has forced workers to cut back spending on non-essential items such as beer and airtime, ultimately hurting firms such as EABL and Safaricom.

The alcoholic beverage industry is generally considered recession-proof and some middle-class Kenyans are still prioritising their favourite tipple. EABL also says multiple excise tax increases in Kenya have exacerbated consumer prices and have particularly impacted price-sensitive consumers.

"The board of directors has recommended a final dividend of Sh1.75 per share (2022: Sh7.25) subject to withholding tax, to be paid on or about October 27, 2023, to shareholders registered at the close of business on September 15, 2023," said EABL. "This will bring the total dividend for the year to Sh5.50 per share (2022: Sh11.00)."