Unilever (LSE:ULVR) is moving forward with its plan to carve out its ice cream unit, confirming that Magnum will be listed as a separate company by mid-November.
The restructuring represents one of the most significant changes to Unilever’s portfolio in recent years. Still, analysts believe the broader financial impact on the group will be relatively modest.
Barclays estimates that the separation will remove about 13% of 2024 sales, 10.5% of EBITDA and 9% of EBIT from Unilever’s accounts. “This is unlikely to be a material,” the brokerage noted, adding that once ice cream is separated, Unilever’s EBIT margin could rise by nearly 100 basis points.
The leaner group will also experience fewer seasonal swings in performance, giving management greater scope to concentrate on higher-growth areas such as Beauty & Wellbeing.
Unilever intends to keep a minority holding of under 20% in Magnum for as long as five years, with plans to gradually sell that stake. Barclays said the proceeds “will be sold down in an orderly manner to maintain capital flexibility through a reduction in group net debt.” The bank expects most of the initial proceeds from Magnum’s debt to be returned to Unilever in the form of a special dividend, which would be directed primarily toward reducing borrowings.
Unilever’s leverage is expected to remain close to 2x after the split, leaving its credit profile intact. Magnum, meanwhile, will launch with net leverage around 2.4x on €1.3 billion of EBITDA, backed by €3.8 billion in gross debt. Moody’s assigned it a Baa2 rating, while S&P rated it BBB.
Barclays also highlighted that while Unilever has already refinanced €1.9 billion in bonds maturing in 2026, it faces a “maturity tower” in 2027 and 2028, when €3.4 billion comes due. Proceeds from the demerger could provide breathing room. “For Unilver Remainco to reach a 2.0x leverage ratio, we calculate it only needs to reduce debt by c.€1.5-2.0bn,” the bank said, suggesting that some proceeds might also be returned to shareholders.
Still, Barclays emphasized that the transaction will not significantly affect bond spreads. “The Magnum spin-off is unlikely to be a material spread driver, in our view, as Unilever’s rating and leverage target remain unchanged,” the brokerage said.
In its latest half-year update, Unilever reported €30.1 billion in sales, up 3.4% organically, with its Power Brands contributing more than 75% of revenue. EBIT slipped 4.8% to €5.8 billion, with margins narrowing to 19.3% on higher brand spending. Free cash flow fell to €1.1 billion, hit by separation-related expenses and working capital, while net debt climbed to €26.4 billion, pushing leverage to 2.1x.
The group reaffirmed its guidance for 2025, targeting 3–5% underlying sales growth, margin gains and leverage around 2x.
Magnum, on the other hand, is set to debut as the world’s largest publicly traded ice cream business, with €7.9 billion in 2024 sales and a roughly 21% global retail market share. Despite its scale, the brand’s margins remain below those of broader consumer staples peers due to industry-specific supply chain challenges. Agencies view its outlook as supported by strong branding and diversification, but tempered by seasonality and sensitivity to commodity costs.
For Unilever, the spin-off offers a more streamlined focus and a small boost to margins, without altering its overall financial footing. As Barclays concluded, “current spread valuations look fair, with EUR bonds trading well in line with rating peers like PEP and KO.”
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