In the grand tradition of corporate breakups where everyone pretends it's amicable, Unilever unceremoniously spun off its ice cream division into The Magnum Ice Cream Company (MICC) last December.
The recent earnings report was just so-so. As you might expect the winter quarter for an ice cream company isn't the good one. The recent drop from $20 to $16 got my attention.
An old Wall Street adage is to "buy fur coats in the summer!" but I'll take the liberty here of saying we should consider "buying ice cream in winter!" There's a cherry on the top here in that this is a business that will not be impacted by AI - if anything people will eat more ice cream when confronted with the AI apocalypse.
MICC is a unique public pure-play behemoth with 80 countries, 30 factories, 3 million freezer cabinets (distribution moat), and four of the top five global ice cream brands – Magnum, Ben & Jerry's, Cornetto, and Wall's. Revenue held flat at €7.9B in FY2025 amid demerger drama, but organic sales growth ticked up 4.2% (volume +1.5%, price +2.6%). It's the category king in a $80–120B market projected to grow mid-single digits.
The spinoff resulted in a number of one-time expenses and charges that destroyed what are generally very healthy margins and Unilever saddled the the new company with $3B in debt. (rates and term structure is fine here)
Results from here will get better and better to the point of improving the balance sheet enough to pay a dividend and buy back shares. At these levels we are getting this business for about 10x longer-term earnings/cash flow.
Although the business is immune to AI disruption some investors buy in to a negative GLP-1 narrative. I'd say not so fast on that one for two reasons: 1) smaller portion sizes are now more welcome by this group which improves unit margins and 2) new types of "frozen treats" include options that are sugar free and high in protein.
Let's get into the company, the management team and the return possibilities.
