Net profit nearly halved, is the pain of Magnum ice cream's "going solo"?

Since Unilever spun off and became an independent publicly listed company, the first financial report of Magnum Ice Cream has encountered a " Waterloo." Recently, Magnum Ice Cream reiterated its strategic focus for 2026, including emphasizing low-sugar and plant-based product innovation, strengthening localized investments in the Chinese market, and considering acquisitions of Chinese or European and American specialty brands to expand its business footprint. Previously, the 2025 financial report disclosed by Magnum Ice Cream showed that its annual revenue was €7.9 billion, roughly flat compared to the previous year, but net profit dropped sharply by 48.4% to €307 million from €595 million in 2024, nearly halving. The ice cream market remains resilient, and Magnum still achieved high-single-digit organic sales growth in China, maintaining the second-largest market share. However, to achieve the previously targeted 5% growth in 2026, Magnum faces significant challenges.

Performance Plunge

A notable point in this financial report is that, since its independence in December 2025, Magnum Ice Cream’s first financial report shows a 48.4% year-over-year decline in net profit to €307 million. The report indicates that the main reasons for the profit decline include increased costs related to spinoff and restructuring of €118 million, higher net financial costs of €104 million, and the impact of exchange rate fluctuations on operating performance.

The financial report reveals that the costs of this spinoff far exceeded expectations. It shows that in 2025, Magnum Ice Cream paid a total of €564 million (approximately 4.653 billion RMB) in cash for the spinoff. This expenditure was broken down into three parts: €1.964 billion for acquisitions and related business disposals; €1.205 billion for organizational separation costs; and €1.485 billion for implementing a mid-term operating model.

Additionally, the large expenses severely strained Magnum Ice Cream’s cash flow. In 2025, the company paid Unilever €905 million (about 7.466 billion RMB) in “inventory subsidies,” and combined with high spinoff costs and complex transitional arrangements, its cash flow plummeted from €6.625 billion in 2024 to just €314 million in 2025.

Jian Junhao, a well-known strategic positioning expert and founder of Huace Brand Positioning Consulting in Fujian, told Beijing Business Daily that “Magnum’s significant net profit decline mainly results from costs related to spinoff and restructuring, increased financial costs, and exchange rate impacts. These are one-time, phased expenses, compounded by large subsidies paid to the parent company, which put pressure on free cash flow and are more about financial restructuring than actual business decline.”

Beyond the pain caused by huge spinoff costs, Magnum Ice Cream is also caught in the global growth slowdown. In Asia, the Middle East, and Africa (AMEA), Magnum’s market share has increased in China, Thailand, and Pakistan; in the Americas, it remains a market leader but was affected by U.S. food stamp policy adjustments in Q4 last year; in Europe and Australia-New Zealand (Europe & ANZ), profitability was impacted by rising raw material prices, especially cocoa.

A report from J.P. Morgan noted that Magnum’s sales volume and revenue growth last year were below expectations. Due to a profit margin of 15.9% in 2025, down 100 basis points from 2024, market consensus expects Magnum’s adjusted EBITDA margin this year to be revised downward from 16.8% to around 16%.

Increasing Focus on the Chinese Market

Regarding China, Magnum Ice Cream remains very confident. Earlier this year, Magnum planned to launch nearly 30 new products in China, covering brands such as Magnum, Cornetto, Wall’s, and Qian Ceng Xue. This marks the first comprehensive product lineup in China after its December 2025 spin-off, with a new corporate image.

Performance-wise, in the first half of 2025, China revenue reached €270 million, achieving double-digit growth. China has been explicitly designated as Magnum’s “innovation and growth engine” globally. In 2025, Magnum launched numerous new products in China, the most in its history, tailored for local consumers, which has been well received.

Furthermore, to address the low coverage of freezers, Magnum plans to continue increasing freezer placements in China. Peter ter Kulve, CEO of Magnum globally, emphasized the importance of channels, stating, “In 2025, the company achieved double-digit growth in e-commerce channels; in China, over 20% of sales come from e-commerce, while off-premise channels contribute relatively less.”

However, in China, Magnum faces stiff competition from local companies like Yili and Mengniu, which leverage extensive distribution channels and mature cold chain systems to dominate the lower-tier markets. Data shows Yili currently holds the top position in China’s ice cream market, while Magnum’s brands, Magnum and Cornetto, rank fourth and fifth respectively.

For future plans, Magnum intends to continue strengthening product innovation, expanding consumption scenarios, promoting high-end brands globally, and increasing channel investments. Specifically, in Europe and the Americas, the focus will be on optimizing factory capacity and supply chain efficiency to reduce costs and improve gross margins; in Asia, Middle East, and Africa (AMEA), the company will enhance freezer deployment and improve distribution in Indonesia, the Philippines, and other markets.

Jian Junhao believes, “High single-digit organic growth in China, nearly matching last year in the first half, shows the core business remains strong. Facing the cost-performance advantages of Yili and Mengniu, Magnum does not compete on price directly but instead builds differentiation through imported quality, brand recognition, and healthy formulations, or by establishing high-end scenarios through channel stratification, maintaining a long-term barrier between high-end value and price-sensitive markets.”

However, Unilever’s management has previously emphasized that, after the ice cream business spinoff, the company is expected to achieve 5% growth in the medium term. This target seems to have been delayed until after 2026. After the “solo flight” pains, Magnum needs to prove whether this decision was correct through its performance.