Barclays has initiated coverage on The Magnum Ice Cream Company B.V. (LSE:MICC) with an “equal weight” rating and a €13.7 price target, striking a cautiously optimistic tone on the newly independent ice cream group while highlighting several early hurdles that may complicate its growth story.
The bank expects the world’s largest dedicated ice cream producer to face slight margin erosion in the near term, forecasting a drop of roughly 30 basis points in reported EBITDA margins in 2026—counter to management’s plan for annual improvements of 40–60 basis points. Barclays anticipates margins of 16.4% in 2025, followed by a dip in 2026 and a modest rebound to 16.6% in 2027.
“We see a compelling margin story, but somewhat back-end-weighted In our view, there is no denying that Magnum has a compelling margin story going forward, and we believe that demerging from Unilever is the right move to unlock its full margin potential,” the brokerage said.
Analysts flagged three major areas of concern. First, the acquisition of Kwality Wall’s in India is expected to add approximately €200 million in revenue but contribute no EBITDA, creating dilution. The Indian business has seen margins plunge from 7.1% in FY 2024–25 to 0.0% in the first half of FY 2025–26 due to cocoa inflation and GST-related price resets. Second, royalty fees from Kwality Wall’s—€16 million in 2024—will disappear once the business is fully integrated, weighing margins by another 20 basis points. Finally, depreciation expenses will shift from non-cash to cash items, creating a further 20 basis point drag.
Volume growth is viewed as the biggest unknown. From 2019 to 2024, Magnum delivered average organic growth of 3.9%, but volumes declined 0.6% while pricing contributed 4.5%. Quarterly volumes have been volatile, ranging from a 10.1% drop in Q3 2023 to a 6.7% increase in Q3 2024.
“We usually prefer companies, especially newly listed companies, to build a track record and create a ’meet or beat’ culture,” analysts wrote, expressing doubt about whether Magnum can sustain the momentum required to hit its 3–5% organic growth target.
Barclays also questioned the brand’s pricing power given its sizable exposure to Turkey, which accounts for 7–8% of revenue but an estimated 14–15% of EBIT. Turkey is considered a hyperinflationary market, and U.S. pricing has recently slipped into negative territory.
Another factor weighing on the long-term outlook is the rise of weight-loss drugs. U.S. per-capita ice cream consumption has dropped about 25% since 2000—from 26.1 pounds per year to 19.5 pounds in 2023. With roughly one in eight U.S. adults using GLP-1 medications as of May 2024, research from Cornell University suggests these consumers cut spending on indulgent items by 6.7% to 11.1%.
Capital allocation is under scrutiny as well. Management expects capital expenditure to rise from 4% to 5% of sales to refresh freezer infrastructure and fund expansion in emerging markets. Barclays questioned whether that level is sufficient, noting that “nearest peer Froneri has been running with higher capex requirements than Magnum on average in the last three years.”
Free cash flow is projected to fall to €527 million in 2026 from €814 million in 2024. Net debt is expected to reach €3.5 billion by the end of 2025, which would put leverage at roughly 2.6x adjusted EBITDA, with €139 million in net interest costs forecast for 2026.
Despite the caution, Barclays emphasized several enduring strengths. Magnum now stands alone after its 2025 separation from Unilever and operates a global network of 3 million freezer cabinets—twice that of competitor Froneri. It also owns six of the world’s top ten ice cream brands and holds roughly 20% of global market share. Research investment was €92 million (1.2% of revenue) in 2024, compared with Froneri’s €14.8 million (0.3%).
The €13.7 price target is based on a discounted cash-flow model using a 7.5% weighted average cost of capital and 2% long-term growth rate, equating to 8.7x expected 2026 adjusted EBITDA.
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