The Magnum Ice Cream Company N.V. ($MICC)

Good morning, and welcome to the The Magnum Ice Cream Company webcast for the Q1 2026 Trading Update. My name is Razia, and I will be your operator for today's call. Before we begin, please note that today's presentation is being recorded. [Operator Instructions] With that, I'm pleased to turn the call over to Michele Negen. Michel, please go ahead.

Good morning, everyone. Welcome to the Magnum Ice Cream Company's Q1 Trading Update Webcast. My name is Michele Negen, Head of Investor Relations, and I'm here today with our CEO, Peter Kulve; and our CFO, Abhijit Bhattacharya. The press release and investor presentation were published on our published on our Investor Relations website this morning. The replay and full transcript of this webcast will be made available after the call. Before we start, I want to draw your attention to our cautionary statement on the screen. You will also find the statement in the presentation published on the website. In a moment, Peter will take a few minutes to talk you through the highlights of our top line performance during the first quarter of 2026. After that, we will open the floor for Q&A with Peter and Abhijit. And with that, Peter, over to you.

Good morning, everyone, and thank you for joining us for our Q1 trading update. I'm pleased to share that we had an encouraging start to 2026. Before I get into the details, let me give you the headline. The ice cream category continues to grow. We are executing well on our strategy and whilst we are mindful of the heightened uncertainty in the global environment, particularly in the Middle East, we are reaffirming our full year outlook. In Q1, we delivered organic sales growth of 4.5% with a healthy split between volume growth of 2.9% and price growth of 1.6%. The India and Portugal, we're not in the parameter and paid royalties for the use of the TMICC brands. This was recognized in revenue, OSG and OPG. Excluding these royalties, in Q1 2026, the underlying sales growth was 4.7% with underlying price growth of 1.8%. Our revenue came in at nearly EUR 1.8 billion, down 1.2% versus Q1 2025. The decline was entirely driven by foreign exchange. The strengthening of the euro created a translation headwind of 5.5% in the quarter. I'm especially pleased with the volume contribution -- this represents the kind of quality growth we aim for and reflects the work that we have done on innovation and execution. We are seeing this working across the business. with every region contributing to our growth. In Europe and ANZ, we grew 4.6% organically, excluding royalties, with positive price contribution excluding royalties, of 0.3%. Volumes were up 4.3%, helped by strong innovations. Germany and the U.K. delivered high single-digit growth. Italy is still a work in progress. We are improving our distribution and point-of-sale execution there, and I'm convinced we'll get it right. In the Americas, we delivered 2.6% organic sales growth. The U.S., our biggest market, delivered organic sales growth of 3.2% and with a positive volume growth of 1.8%, led by Yasso and Popsico, which both delivered double-digit organic sales growth in the quarter. Ben & Jerry's grew low single digit as we launched new formats. I will come back to that. The work we have done over the last 18 months to build a truly competitive U.S. business is showing up in the numbers. Sales in Brazil declined in the quarter. We continue to execute our turnaround plan, focused on new innovations more targeted promotional and pricing activities and increased distribution. In EMEA, we delivered our strongest regional performance at 7.9% organic sales growth with both volume and price contributing. Turkey and Pakistan delivered double-digit growth, while China had a strong seasonal opening driven by innovation including our Pistachio and Blumen Magnum stick a new connect of flavors such as [indiscernible] lemon with light cheese doesn't sound delicious. Our innovations are exciting and contributing to category growth. I'll come back to this to give more color through the lens of our brands. Our productivity program is on track for the full year with good progress during the quarter. As I've said before, productivity is a core pillar of our strategy. and gives us the fuel to reinvest behind our brands. All scheduled Q1 TSA exits were concluded on time and remain on course to finalize all remaining TSA exits by the end of 2027 as planned. I would also like to share a brief update on the separation process and the parameter of the business. When we announced our full year '25 results, we said we would be incorporating India and Portugal to the group in '26. We expected this to happen in H1 '26 and and I'm pleased we have already completed the acquisition of our India business on the 30th of March, and we also acquired the business in Portugal on April 1. These businesses will be reflected in our consolidated results from Q2 onwards. On input costs, we expect the increase in the cost of energy across the supply chain including raw materials, energy, packaging and freight to be offset by tailwinds from commodities or mitigating actions and our productivity program. Whilst we are mindful of the heightened uncertainty in the global environment, particularly in the Middle East and the associated knock-on facts to input cost our regional direct exposure remains limited, and we are taking mitigating actions. Our focus is on executing our growth strategy and productivity program and we are reaffirming our full year outlook. We expect organic sales growth for '26 to be between 3% to 5%. And and an adjusted EBITDA margin improvement of 40 to 60 bps on a comparable parameter basis with 2025. The reported improvement in adjusted EBITDA margin is expected to be between 0 and 20 bps, primarily due to the impact of the acquisition of the India business. As communicated earlier, we expect the improvements in the year to be weighted more in the second half of '26 due to the phasing of TSAs and the benefits of cocoa pricing. Now let me take a moment to share with you some more color about our brands, the innovations that are driving our growth. Magnum delivered mid-single-digit organic sales growth supported by the launch of Magnum Pistachio & Peach across the EU and Turkey. We also continued the rollout of the BonBons format across Europe and the [indiscernible]. These are fantastic examples of what we mean by taking a premium brand into new formats to unlock occasions. Ben & Jerry’ was overall flat in Q1. Americas delivered low single-digit growth, while Europe and ANZ lapping double-digit growth in Q1 last year declined. I mentioned earlier the launch of new formats in the U.S. and Europe. The new Ben & Jerry’ centric and bar formats have been well received, and we expect momentum to build. And in the U.S., Ben & Jerry’ innovations are ranking in the top 10 SKUs with 4 of the top 10 super premium, a strong signal that the brand is continuing to resonate with consumers. Cornetto delivered low single-digit growth supported by the launch of Pistachio Max in Europe and Turkey and new flavors that supported a strong seasonal opening in China. The Heartbrand delivered high single-digit growth driven by Twister Freeze, the Minecraft stick, Volcanix, the 5-layer chocolate ice cream stick and Solero BonBons rolling out across multiple European markets. Alongside the strong performance of grape ice balls in Southeast Asia. I also want to call out as Yasso specifically. Yasso is another great example of what we mean by format innovation that expands the category moving from stick to pines unlocking new consumption occasions and new shelf space. It's the kind of thinking we are applying systematically across the portfolio. For those of you based in the U.S. do look out for them. They're delicious. Before we go to Q&A, let me close with a few shorts that I would like you to take away from our performance this quarter. The ice cream category continues to grow around the world. Consumer demand for our category is good, and we are well placed to capture this. Our growth this quarter has been broad-based with a good balance of volume and price. -- and growth across all regions. On execution, the investments we have made in our frontline first model are delivering results. We are improving brand availability across our 3 channels, growing distribution points and deploying more freezes in high-growth markets. As I shared in the previous slide, Innovation is driving our performance, helping us to win with consumers. We are well set up for the summer season with better customer engagement. Our outlets activating earlier and innovation rollout showing the frontline first model is working. We are on track with separation. I'm pleased to have India and Portugal as part of the total group. And finally, we will remain operationally agile as we continue to watch the external environment carefully, and we are taking mitigating actions. In summary, an encouraging start of the year built on sound execution as we prepare for the season ahead. We continue to execute on strategy driving grocery innovation and availability, delivering our productivity program and reinvesting behind our brands. With that, let me hand back to Michele to take your questions. Thank you.

Thank you, Peter. As we move to questions, I would like to ask you to be mindful and ask your questions in relation to this trading update while limiting it to 1 question each so we can get around as many of you as possible. With that, I hand over to the operator for instructions on how to ask your questions. Thank you.

[Operator Instructions] We are now going to proceed with our first question. The questions come from the line of David Roux from Morgan Stanley.

Well done on the the update. I just had a question around commodity costs. I mean you flagged a tailwind from commodity costs through the rest of the year, notably cocoa. But perhaps could you just talk a bit about how are you thinking about dairy and sugar inflation into the second half? And will this be a net sort of headwind and tailwind. And can you just remind me how much of your dairy exposures to liquid milk versus milk powder?

David, this is Abhijit. Thanks for the question. So when we did our year-end call, we were not fully covered or hedged for the year. You do that progressively -- and I think the way the cocoa prices have developed give us a little bit of tailwind. Similarly, on dairy a little bit of tailwind as well, -- so we have -- and a little bit on palm oil as well. So overall, on all these 3 elements, we've got a little bit of tailwind compared to the place we started off the year. And that's helping, of course, to partially offset the headwinds that we get from the whole fuel situation with the crisis in the Middle East.

We are now going to proceed with our next question and the questions come from the line of Warren Ackerman from Barclays.

Good morning, Warren here at Barclays. Ask 1 question, but I want to give it go. Can you maybe, Peter, kind of sort of dive into a couple of the geographies in a bit more detail. I mean Brazil and India both been in turnaround mode, India obviously coming into perimeter. How should we think about those 2 big ones the balance of the year? And then maybe just related on North America, it seems like things are picking up a little bit. Can you maybe kind of go into a little bit more detail of what you're seeing in terms of market trends, categories, et cetera, and brands?

Let me start with the U.S. The ice cream market continues to grow with approximately 3% latest readings that is driven by consumers moving out of bulk ice cream into handheld ice cream, better quality, higher price or more healthy. as we discussed before, GLP-1 strengthens this trend. So American market is solid. We look at weekly shares, monthly shares, but when you look at the last couple of trend lines our share is good in these markets, driven by some really successful innovation like the Bluey [indiscernible] like the Yasso pines, which now are taking really serious share. So innovation and execution growth in the States on the back of a good market. Then when you look at India, last year, we basically changed everything in India. We moved from -- fat ice cream, which made us a frozen dessert to dairy, ice cream. We are progressively changing the portfolio, doing a major step-up of quality. Reprice corrected and brought us the portfolio in line with core snacking price points. We basically built a completely new team, and this is literally completely and we changed our distribution approach. Unilever traditionally did not invest in cabinets nor in distributors with cold stores, and we basically brought the our classic Turkish distribution model to India, and we started to invest behind it. We now see volume picking up. And as I said before, India is the largest dairy market in the world. Within time, it will also be the largest ice cream in the market, in the world, and we'll take -- we will work very hard to take our fair share there. Profitability is still not very good. We are investing behind the business, but especially need to make a supply chain intervention because historically, we had 1 factory and with our current growth rates, we need 4 factories. And we're working on -- and when we do that and we get the growth and get the premium brands growing, Magnum is growing plus 50% at the moment. At the third moment, profitability will come. That is 2 good stories. In Brazil, we changed all management because I believe we have an execution problem. And we did have an execution problem, but it's slightly more so our pricing is not correct. We are not in line with cost snacking price points, and I need to do a portfolio adjustment which will take time just like it took time in India. Fundamentally, Brazil is a very good, fast-growing ice cream market.

We are now going to proceed with our next question. And the questions come from the line of Robert Jan Vos from ODDO BHF.

I thought that your [indiscernible] wire had a bit more cautious tone about trading than the solid growth that you reported this morning. Is it fair to assume that growth accelerated in March and related to this momentum continue in April?

It is the beginning of the year, and we stand firm with the guidance that we have given last year, the 3% to 5% growth to 40 to 60 bps underlying margin improvement. And what is really pleasing that operational rigor is improving in this business. That was the core problem, whether that was channel and customer execution, marketing and innovation execution, our demand creation programs. And we also seem to have more grip on cost and productivity. So that is basically driving the results.

We are now going to proceed with our next question. And the questions come from the line of David Hayes from Jefferies.

So my question is just on the Asia risk in terms of out-of-home behavior is changing? And I guess, in terms of energy uses freeze some of these markets in Southeast Asia, they aren't use air conditioning. So we're thinking is that a risk for freezes in store outlets. So just wondering, a, is that a dynamic that you're seeing markets like the Philippines, Indonesia and what the percentage of sales exposure would be to those kind of markets, that kind of dynamic?

Thank you, David. As you know, some Asian markets have subsidized energy markets like Indonesia. They don't have that in Philippines. I think we see a little bit the same as we saw during COVID that when -- it hasn't happened yet, but it could happen when consumers go under stress they go less on trips. They don't take the car anymore, but stay around their houses, which tends to be a good thing for us because we have very fine based distribution. You literally find us arms legs of desire in Asia. -- maybe you can't afford to go to a restaurant anymore, but you can still afford to have a nice ice cream after your [indiscernible]. So in general, we don't see anything yet. But when people stay more around their houses, that tends to be a tailwind instead of working against us.

We are now going to proceed with our next question. And the questions come from the line Celine Pannuti from JPMorgan.

So my question is on the growth and the balance of the year. So basically, you started very strong Q1 with the the growth at the top end of your 3% to 5% range. Obviously, we know there is a timing of Easter, which we've seen in other companies like the segment like softdrinks and beer, for instance. Would you agree that -- and can you quantify to which extent that has helped? And then obviously, we are mindful that it is a tough comp in the second quarter. So if you could give us a bit of color on that. And I presume the other 1 on Q2 is the impact on Middle East in Turkey, which is 1 of your big markets. Are you expecting a low incidence of tourism to have an impact? I know it's a broad market share you have there with not just risk, but if you could give us a bit of an overview of your thinking around that big and profitable market.

Okay. Let me start with Turkey. Turkey had a very strong start of the year, approximately 5% and of our sales goes to tourists. So it's not a big impact. But assume because 1 of the -- you guys wrote an article on tourism in Turkey, but assume that the tourists are down, that's 20% or 5%, not assuming that the cheap -- would go to Turkish tourists. So this is not going to have a really big impact on the business. And when I go to Q1, our most important festival this quarter is actually a Ramadan because as we know, as part of our occasion-based growth model, we activate all these festivals, but a really good Ramadan this year, Indonesia, Pakistan. We had a good Chinese New Year, which is a large 1 as well. And Easter was a little bit earlier in April than last year, and that will have a marginal impact on our Q1 sales. Just a little bit, nothing meaningful.

We are now going to proceed with the next question. And the questions come from the line of Jeff Stent from BNP Paribas.

Just a point of clarification on the commodities. So you said compared with where you were at the start of the year, dairy and palm oil are now more of tailwind, yet when I look at any price index for dairy powders or palm oil, they've increased quite markedly. So if you could just elaborate why those are now more of a tailwind, but that's so much at odds with what's happened to market prices?

Yes. Jeff. So we actually covered pretty in the year and basically, the prices that we covered for the full year are better than the prices that we had assumed. So the assumptions that was there was slightly higher. So that gives us to -- in our model a bit of a tailwind to partly offset the headwind that we talked about.

We are now going to proceed with our next question. And the questions come from the line of Antoine Prevot from Bank of America.

So I wanted to drive a bit more on Europe and Australia, very good volume mix there. Could you impact a bit the drivers here, especially because it's significantly better than what I can see on the scanner data. So anything to flag here? And could you quantify -- I mean, you said Easter is not big, but I guess, see some benefit into Europe. So any quantification of the impact for this year on Q1.

What we said when we presented ice cream for the first time last year, is that what the business really needs is operational rigor. -- and our operational rigor is improving. We were earlier with our innovation this year. They were ready in time. We were earlier with activation of outlets we have better customer programs. And that's in Europe because in Australia, we're obviously in core summer. And that is basically driving this extra little bit of growth. And that's why we're also confident to reaffirm our guidance for the year. The impact of Easter 10 days earlier in April, as I said to Celine, is really marginal, doesn't have a really big impact. Our business in Australia, we don't often discuss Australia had been struggling for a number of years, but our [ minthol ] factory performance has really come back after many years of struggle, which helps. So we have supply. Our innovation programs are good. And generally, we have a good run in Australia with good shares for the first time in many, many years.

We are now going to proceed with the next question. And the questions come from the line of Bingqing Zhu from Rothschild & Co Redburn.

I think when -- in the Capital Markets Day, you've outlined the target to grow the cabinet freezer number by 2% per year over the next 5 years. Can you share the progress on which regions or market we will see the most addition and of course, the number is not just about numbers. Can you also talk about what you're doing to enhance freezer deployment or maybe raise the return on investment on your existing freezers just getting ready ahead of the summer season?

Bingqing, this is a very good question. When I talk about operational rigor, obviously, the cabinet system is really important. It's not just buying the cabinets, but having the distributors the IT systems, the replenishment, the maintenance in order. It's very operational intense, and we made really good progress. Hence, we can start outlets earlier. When I look at India, I believe in India, we have placed 50,000 cabinets and activated them over a 2-month period. So we really develop a muscle to do this really well. And then when you have a portfolio that rotates with brands that are attractive -- at attractive price points, you relatively quickly get volume going through these assets. And then as we have said before, in 2, 3 years' time, we have fewer payback on a new cabinet. But it's all about operational rigor and it's not perfect yet. It's never perfect, I suppose, as a CEO, but we are getting better.

We are now going to proceed with the next question. The question comes from the line of Karel Zoete from Kepler Cheuvreux.

Yes. I have a question on the Americas. So in the U.S. market, you did 2% volumes even better on top line growth. But Americas in total is down. Can you speak a bit about the other markets, for example, Mexico, Latin -- and related to that, what can we expect around World Cup activation. Is that going to be potentially a trigger for the category as well?

who the [indiscernible] Karel. Yes, World Cup activation. Events are for us an opportunity to draw people to the cabinets and to the retailer shelves -- and in different countries, we have activations, whether that is special ice creams or promotions -- and this 1 just like America 250 is 1 of these occasions that you can make the category relevant, especially when lots of people come together in their houses. -- ice cream is a fantastic way to celebrate. But going back to your first question, yes, the United States had a very strong start of the year on the back of a strong ice cream market. Volume-wise, South America was weaker. Main culprit is Brazil, where we had declining volumes as we haven't got the core price positioning of the category right. And we're working on that, but it always takes time before you have realized most of your portfolio at different price points with different different executions.

We are now going to proceed with our next question and the questions come from the line of Samantha Darbyshire from Goldman Sachs.

My question is kind of more around the mechanics of how you actually sell in your products in Q1. And -- and I'm just thinking about this because in Q4, you bought back some stock from the freezer cabinets. And as we come into Q1, does that impact selling back in -- do you have any kind of retailer buy-in ahead of the weather getting better, so not just thinking about Easter, but do you have any material impact there? Just trying to understand because we're not quite as familiar with the mechanics of how this business works, yes.

Good question, Sam. We have in-home channels, grocery channel, and we have cabinet channel. In grocery, retailers have winter assortments and summer assortments. And our job is to get as large possible share of the shelf and then later share of promotion. And I think this year, we were across the world, very successful with our shelf programs, which will definitely have helped in Q1. Then when it comes to cabinets, cabinets get activated at the beginning of the season. Sometimes retailers don't have a lot of stock in their cabinets anymore. And then you load -- you basically replenish these cabinets to be ready for when the sun is there and you place new cabinets or you reallocate cabinets from poor locations to better location. And that is the sort of work that happens in Q1 and still also in Q2.

Maybe clarify, Sam, you mentioned about taking cabinets back in Q4. I just want to clarify that, that was nothing out of the order. In the Q4 call, Peter was just explaining that's how normal business works. We take cabinets back, refurbish them and put them out in the trade. So there is no impact of taking stock back and then giving it back in the Q1 numbers. We really run and this is our deep, deep belief, we run the business on fundamentals and operational rigor that is in the complexity of an ice cream business, that's the only sensible thing to do.

We are now going to proceed with the next question. And the question is from Maxime Stranart from ING Bank.

I hope you can hear me this time. So 1 question on my end. We have talked a lot about innovation in this quarter. could you maybe elaborate on the contribution of those new products you have launched over the last 12 months of top line growth and how the older portfolio has performed as well -- that would be all for me.

It's still early days to see what's going to be the big winner of our innovation. But we have, as presented also at the CMD changed our innovation strategy. Historically, this business did a lot of flavor innovation, flavor rotation innovation. And although that's important to activate the brands it doesn't tend to drive growth. When you really structurally want to drive growth, you need to make your brands relevant in different occasions. And moving from a Ben & Jerry’ pine to a Ben & Jerry’ sandwich is a really good example of that. it's very difficult to eat Ben & Jerry’ [ pint ] when you're driving a car. The sandwich is made for on-the-go consumption. And by the way, also incredibly addictive delicious. But -- so our innovation is shifting to occasions and formats -- and I believe next year, the operational rigor and execution and sales that will also help to drive category growth. And when you are the 1 who drives category growth, it tends also to be good for your shares.

We are now going to proceed with the next question. And the questions come from the line of [ Andre Candria ] from UBS.

Good morning, and thank you, Peter Abhijit and Michele. One for me, please, on your margin guidance. Obviously, you've already spoken about your costs increasing as a result of the crisis in the Middle East with 1 of the offsets being commodity tailwinds from cocoa, dairy and palm oil. However, could we see your gross margins essentially expand less over the full year as a result of these with SG&A being used more as a source of savings? And within that, will you still seek to grow your A&P this year versus last .

Andre, let me give you some color on that. As you know, the situation with the inflation of specialty related to oil is quite fluid. So we work on a number of scenarios to see what mitigating actions we trigger at what point of time. But let me give you 3 big buckets. So the first 1 is on revenue growth management, where we look at our discounts, et cetera. So that we expect to recover about 1/4 of our headwinds through better and more rigorous revenue growth management. About 1/4 of the headwinds will be mitigated through what I spoke about earlier, the tailwinds that we have on commodities compared to the start of the year. And the remaining half will come through a certain acceleration of productivity measures that were in the pipeline, but we have quickly kind of underpin them and make the investments necessary to get them. Now regarding advertising and promotion, we continue to spend what we mean to all advertising. We are not forced to cut advertising to make the targets. Having said that, I think Peter mentioned in our Q4 call, we have shifted agencies. We are moving to much more digital content creation and some of those productivity measures will come. But in terms of working media and what is visible to our consumers, we will continue to invest what we need to -- and no cuts there.

And the question come from the line of Tom Sykes from Deutsche Bank.

Yes, just a follow-up on this sell-in commentary that you've given. I mean you've historically made 70% of your EBIT in H1. So just to clarify some of the things you said -- did you say you started a little bit earlier. So does that mean that there's a bit of extra sell-in, if you like, ahead of consumption rates is the actual cabinet square footage higher? And do you expect, therefore, the sell-in ahead of the season in the Northern Hemisphere to be higher? And given your cost commentary, isn't that all largely H2? I mean your costs must be covered and largely sort of sorted for H1. Maybe there's a bit of inflation. Doesn't that mean you will largely know your EBIT for H1, which is your highest semester?

Thank you, Tom. Yes, we were -- as we said in our last call, we were largely covered for H1 with most of our costs, including energy. So you're right. So that brought us a little bit of time to do all the mitigating actions for H2. And last year, we had 380 bps cost inflation. -- which was, of course, quite a shock to the system. But we developed a real muscle to develop with cost shop. So that was the advantage of this unfortunate cocoa spike. So we built a muscle to deal with shops. Then coming to cabinets, we have said at the Capital Markets Day that growing our cabinet fleet and distribution versus declining what happened in the Unilever days. Actually, we would give 0.5% to 1% of additional growth and that is coming through. Activation of the fleet always happens in Q1 and early Q2. And yes, maybe we do it now with a little bit more disciplined, but that's not the big change. But we're actually growing distribution, whether that is shelf positions, in grocery, that is shelf positions in grocery or whether that is out-of-home. And you're right, that's helping to drive growth. in line with plan, I have to say. So also no surprises there.

We are now going to proceed with the next question. And the questions come from the line of Jeremy Kincaid from VLK.

My question is on the Ben & Jerry's brand. Growth there slowed in the first quarter, it was flat overall and declined in Europe and ANZ. So I'm just curious about how we should think about the trajectory for that brand for the rest of '26. [Audio Gap] and if you're seeing any impact from ongoing brand reputation concerns in certain markets?

Brand health of Ben & Jerry is really solid. You could even argue noise -- more noise is good for the brand. Momentum of the brand, shares of the brands are very solid. Last year, we had 14% growth in Europe, ANZ in the first quarter was very difficult to beat that. We had a different trading strategy for this year. But the real big news is that we take Ben & Jerry’ now very forcefully and rigorously out of the pines in other formats that unlock new occasions. I'm convinced Ben & Jerry will have a very good growth trajectory in 2026 on the back of innovation and strong demand creation programs.

With no further questions showing, I will now hand over to Michele to close the call.

Yes. Thank you. Thanks, everyone, for joining the call today. Much appreciated. Any follow-up questions, don't hesitate to reach out to us, and have a nice day for now.

Bye-bye.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.