RBC Capital Markets has maintained a cautious stance on Unilever Plc (LSE:ULVR), arguing that the company’s planned spin-off of its ice cream division, The Magnum Ice Cream Company (TMICC), is unlikely to deliver meaningful value creation. In a recent research note, analyst James Edwardes Jones reaffirmed an “underperform” rating with a price target of GBp 3,900 — around 14% below the current trading price of GBp 4,689.
RBC estimates that the separation will cut Unilever’s group EBITDA by 11–13% and reduce earnings per share by 1–3% over 2026–2027, even after planned share consolidation. The brokerage set a fair value of £38 per share based on an adjusted present value model, slightly below its price target, reinforcing its cautious view.
Although the demerger is expected to sharpen Unilever’s focus on its Beauty & Wellbeing segment, it also involves divesting its strongest-performing business. TMICC, which includes leading brands such as Magnum and Cornetto, currently has a market leadership score of around 250 compared with just over 100 for the remainder of Unilever’s portfolio. RBC highlighted that this would leave the company less dominant in its core markets.
Another area of concern is stranded costs—overheads tied to the departing unit—representing roughly 13% of ice cream revenue. While Unilever has outlined €800 million in productivity savings to mitigate this, RBC believes margin improvement will be difficult in a less favorable cost environment.
The report also questioned Unilever’s ability to meet its midterm target of 4–6% organic sales growth, with RBC forecasting just 2% annual volume growth. It noted that roughly a quarter of Unilever’s portfolio remains tied to non-core brands, adding to the challenge.
For TMICC as a standalone entity, RBC expects moderate upside, led by its away-from-home business, which benefits from higher margins and stronger structural growth. However, its at-home segment faces intense competition from private labels, particularly in the U.S., where store brands already hold about 18% market share.
Overall, RBC’s analysis suggests that while the spin-off may offer operational clarity, it removes Unilever’s most competitively advantaged business without significantly boosting growth or valuation.
Leave a Reply