The Magnum Ice Cream Company N.V. (MICC) Earnings Call Transcript & Summary

Good morning, and welcome to the Magnum Ice Cream Company Webcast. My name is Peter Black, 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 your call over to Lloyd Midwinter. Lloyd, please go ahead.

Hello, and welcome to our webcast for the Q3 2026 Trading Update of the Magnum Ice Cream Company. My name is Lloyd Midwinter, Head of Investor Relations, and I'm here with our CEO, Peter Kulve; and our CFO, Abhijit Bhattacharya. Our press release and this investor presentation are available on our Investor Relations website, where a replay and transcript of today's webcast will also be made available. Before we begin, I'd like to draw your attention to the cautionary statement regarding forward-looking statements and assumptions included in this presentation. This applies to the presentation, webcast and the Q&A session. So Peter, over to you.

Good morning, everyone, and thank you for joining us. Sorry for croaky voice, I've been traveling for 2 weeks through Asia and picked up a bug. First, the headline. Our Q3 performance was extremely strong as we gained market share, driven by volume-led growth ahead of a growing ice cream category. Our revenue grew 12.1% to EUR 2.5 billion, with organic sales growth of 9.6%, led by 7.3% volume. All regions achieved strong growth in the quarter, with the ended summer in Europe, aiding growth by an estimated 2% to 3%. Aside from our top line performance, we are delivering productivity savings in line with our plans. Given our strong performance year-to-date, we are upgrading our gross outlook to approximately 5.5% from 3 to 5 and we maintain our margin outlook for the full year. Before getting deeper into the results, I want to briefly reiterate the value creation model we previously set out. Ice cream is a growing category. And as the leader, we are focused on building and activating our brands like the top beauty companies, bringing the execution rigor of the best bottling businesses and building an ownership culture accountable to deliver. In practical terms, that means creating consumer desire and having the right products in the right place at the right time and at the right price. This combination of innovation, execution and ownership mindset is driving our growth momentum. Our first summer season as a stand-alone company shows the impact our strategy is having on performance. Share gains across all regions and leading the category in delivering volume growth. The good news is these are still early days. We have been laying the foundation for the future, investing in our brands, building our innovation pipeline and improving our execution rigor. All of this gives me confidence in the opportunity ahead. I will now get into the quarter, which was a great one. As mentioned, our revenue reached EUR 2.5 billion, driven by organic sales growth of 9.6%. Reported revenue was up EUR 12.1 million mainly due to 2.6% growth from acquisitions. Our growth was led by 7.3% volume, 7.3% volume and supported by 2.2% price. This derates the strength of our brands and our innovation pipeline. Our frontline first organization was able to capture higher demand with improved execution. Let me share more about what this looks like. All 3 of our regions contributed to growth. Europe and ANZ grew 8.9%, driven by successful innovation and share gains in key markets. whilst also benefiting from favorable weather, which I will address later. We achieved double-digit growth in several markets, including France and the U.K. and Ireland. Magnum and Ben Jerry's both grew double digit with innovation driving performance. In Europe, pricing was lower, mainly due to channel mix and phasing of promotional spend during the quarter compared to previous year. Americas achieved 3.9% growth with continued momentum from our leading brands in the U.S. I'm particularly pleased with our volume growth of 2.3%, which reflects a disciplined approach to an evolving category. We focused on driving growth through innovation, including handheld and premium formats with strong performances from Jason, Ben & Jerry's and Popsicle Consumers in the U.S. are still willing to spend when you get the product right and Justis a great example of this, growing 30% in the quarter. after multiple years of growth before. Now looking towards EMEA. Sales were 17.6% higher, supported by freezer cabinet expansion innovation and execution. We achieved strong performance, including in Pakistan, India and Turkey. Unfortunately, China continued to be impacted by unfavorable weather -- and we experienced channel shifts that we need to deal with. Our focus on brands and innovation, execution and availability is clearly delivering growth across all our regions. These results demonstrate both the strength of the ice cream category and our ability to win. Innovation continues to be 1 of the most important drivers of our growth. Year-to-date, more than 10% of revenue has come from new products. Our approach is aligned around 4 focus areas: first, strengthening our core portfolio through quality upgrades and relevant flavor innovation, second, managing our portfolio architecture across formats, flavors, price points and channels; third, unlocking more occasions with new formats from our premium brands, and fourth expanding the categories through new products with innovative benefits. We have had some great successes. The best example for this season is Magnum [ La Pictachio ] which has become the #1 ice cream innovation across Europe and exceeded even our own expectations. This is a great example of what our enhanced focus as a stand-alone company can deliver. One of the areas I'm most energetic about where we are delivering strong results and see further opportunities is unlocking more occasions with new formats from our premium brands. Investing in the expansion of our Ben & Jerry portfolio is delivering growth and bringing new consumers on board. The brand has an exciting runway for growth as we combine innovation with unique quality and purpose of Ben and Jerry's. Our new formats have been a great success with sticks ranked as 3 of the top 10 in the U.S. and sandwiches ranking within the top 5 of innovations in Europe. Today, we offer Ben & Jerry's in formats or nearly every snacking occasions, a pine for relaxing on the accounts pieces for sharing, sandwiches and sticks for on the go. For consumers in the U.S., where snacking occasions are being redefined, we are meeting the moment. And we are taking this playbook around the world, expanding our other premium brands with new formats such as Magnum codes, levobombons and the YasoPines. Now I will take a moment to talk about the weather. Everyone based in Europe will know we had an extended summer, which was supportive to growth this quarter. Across key markets, there were more days above 25 degrees, average temperatures were higher and sunshine hours increased. The extended summer in Europe aided global sales by an estimated 2% to 3% during the quarter. Favorable weather alone does not deliver share gains. And in some parts of the world, the weather was even unfavorable. What really differentiated our performance was improved execution, which where our frontline first model really came into play. That said, we are not perfect. We will continue to strengthen our refreshment portfolio, create better joint business plans, build supply chain flexibility and implement more advanced planning and forecasting. These capabilities will enable us to respond faster, increase availability and better capture consumer demand at peak moments during the summer season. Another important competitive advantage is our freezer cabinet network. We have around 3 million freezers worldwide and expanded the fleet by 4% this year, driving increased availability. We are deploying more freezers in key markets, focused on the higher growth EMEA region and introducing new innovative formats to increase the efficiency and effectiveness of our fleet. Our approach is highly disciplined. We target the right outlets, deploy and activate our freezer cabinets, then keep them productive and reinvested with discipline. Our cabinets generate, on average, EUR 120 to EUR 1,300 revenue per year, therefore, expanding our fleet by 4% contributes around 1% to growth. And you can expect us to continue investing in freezer cabinets to drive sustainable growth in the future. Now looking towards the full year. We're upgrading our growth outlook to approximately 5.5%. Our fourth quarter is relatively small in terms of sales and mainly the low season and in more developed markets with slower growth. Therefore, we expect Q4 sales to be at a similar level to last year. We are maintaining our outlook for margin improvement, in line with our multiyear financial framework. Productivity savings and operating leverage are expected to offset higher costs primarily driven by oil and energy prices. On a comparable parameter basis, we continue to expect adjusted EBITDA improvement of 40 to 60 basis points. Reported adjusted EBITDA margin improvement is expected to be 0 to 20 basis points, mainly due to the impact of our acquisition in India. This reflects an expected margin improvement of approximately 70 basis points in H2, after absorbing around 100 basis points of additional cost inflation related to oil and energy. To summarize, before our Q&A session, let me close with a few key points. First, I'm extremely proud of the team for delivering such a strong performance with revenue up 11% and organic sales growth of 9.6%, led by 7.3% volume and all regions growing and our productivity program remains firmly on track. Second, our priorities are clear. We are focused on creating demand with our leading brands and innovation and are converting that demand through increased availability and improved execution. This is compounded by our frontline first ownership culture. Third, and maybe most important, we have room to run. Whilst the external environment remains uncertain, the fundamentals of our business are strong. The category is strong, and we continue to be laser focused on executing our growth strategy and productivity program.

Thank you, Peter. [Operator Instructions] Operator, please start the Q&A session.

[Operator Instructions] So with that, I'm going to hand over to Lloyd. And the first question is coming from David Roux.

Peter -- congratulations on very strong performance. I guess as we look into 27, I guess, the group is probably a victim of its own success following a very first strong first year as a stand-alone business. I'm not looking for guidance for '27, but I just want to get an understanding of the strategy. Now you obviously have the medium-term guidance for 3% to 5% OSG and 40 to 60 basis points margin expansion. I'm just wondering to what extent would the business look to protect that next year? And what levers do you have to protect that algorithm or would you be comfortable temporarily operating outside this to sustain investment behind your brands and sort of ensure long-term growth? Because obviously, we're going to be coming off a very high basis of comparison this year, in particular on the growth number.

Yes. Thanks, Dave. Sorry, my voice is a little bit bad. Yes. Last year, we did 4.6% growth. This year, we do 5.5% growth. So this is 2 years that the engine is running. What is now driving the Magnum ice cream company's growth? First, ice cream is a good market. The latest figures I looked at in the U.S., the market was growing 4%. Globally, it's growing between 3% to 4%. So we start with a good market. Then we have now a well codified, embedded system to drive distribution with a lot of operational rigor. We believe it drives approximately 1%. Then we have a very good approach I believe, it seems to work 3 years in a row towards innovation, which we also believe contributes 1% a year. So we are really confident with our algorithm delivering 3% to 5% a year because the engine is running. We really know how to create demand in this healthy category.

Thanks,. And now for the next question. The next question is from Warren.

Yes. Sorry, Warren, your line is open now.

Yes. Peter, Lloyd, Warren here, Barclays. So yes, 2 -- well, 1 and a kind of follow-up. On the main question really is on the margins, again, Peter. You mentioned kind of the operational leverage from this this top line growth and the productivity kind of offsetting the higher cost oil and energy. I'm just wondering whether you're able to kind of help us a little bit more on that? Because I guess the 1 area where you haven't quite yet shown your metal fully on margins. And I was wondering whether we could get like a little bit of an idea on how you kind of see the kind of the gross margin and then a drop through to the operating margin from the volume. I don't know whether there's a rule of thumb on the volume drop through to the margin? And then if you're able to kind of just identify and maybe quantify some of the buckets on the leverage and the productivity versus the COGS pressures that you've got. Just to help us a little bit more understand the shape of the second half with regards to the kind of 0 to 20 bps guidance that would be good. And then the kind of housekeeping follow-up on what you're saying piece, are you able just to kind of some numbers around market shares actually in some of the key geos.

Let me, hey Warren, let me start with market share and then hand over the margin question to Abhijit and he will tell you how the productivity program is translating into the step-up gross margins and EBITDA. Yes. Our market share this year was in a very good territory again. In most markets, we are gaining share year-to-date. Germany is a little bit iffy. So I'm chasing the German GM. In the U.S., we had a period of weakness which is correcting now because agendas went on a promo drive as a reaction to our stick introduction. And in Brio, we probably got the pricing a little bit on for 2 months. But again, we expect this year to have share growth in all regions, including the EMEA region. And it's looking good. But as always, it's hard work. You have a good month, competition reacts. But again, our model of distribution expansion and innovation helps us to structurally gain share in the global ice cream market. But market by market, there are always ups and downs in the quarter, but we seem to be winning this year. Abhijit over to you.

Warren. So let me give you 2 cuts on the margin, 1 on full year basis and 1 for the second half of the year. So of course, we get with this growth leverage. But what we got hit this year, as you are aware, is the oil impact and energy impact. On a full year basis, that was about 70 bps. So we have a leverage -- positive leverage of around 30 bps or so, but that gets eaten up by the oil impact. And then, of course, we had productivity gains as well as some of the commodity tailwinds that we had, which kind of offsets it, which allows us to keep the guidance for the full year flat and that's also in line with what we had said that we were planning to compensate the oil impact earlier in the year. Unfortunately, it has lasted the full year. But more importantly, as Peter mentioned in his opening comments, the second half, our margin impact, our overall margin improvement is 70 basis points in the second half despite 100 bps impact from oil in the second half. So actually, we are exiting the year in the second half with a pretty good profit momentum despite the 100 bps from oil.

And we keep on investing behind our brands and behind our customers. We have -- we actually reinvest more instead of less.

Great. Thanks, Warren, for your question. Hopefully, answer both parts. Antoine, I think next question from your line, please.

A quick question. So you said that you expected Q4 to be broadly flat. Anything to flag there beyond the prebuying reversal in Europe. I mean, I would have thought that growth would remain good, considering price relaunch, U.S. momentum being pretty good and easy comps. So anything to flat.

Yes. Basically, we're a seasonal business. Q1, everybody is running very hard to get the cabinets in place to secure the new shelf space at retailers to land the innovation. So it's a build-up quarter. Then we have 2 quarters of harvest, where now for a couple of years, we had some decent offers. And in the last quarter, is basically a slower quarter for us because it's mainly in-home channel in developed markets. And our investment tends to go to Q1, 2 and 3 because you get a better return. So it's not the season that we're driving very hard. The good news is that actually with the buildup of the Southern Hemisphere. I hope that in the future, Q4 becomes much more of an active quarter for us as a business is now 13%. A dream of the day is 20 and 20 fueled by innovation, fueled by trade activities because that will balance the business a little bit more. So we now guided for sort of flattish after an outstanding, outstanding year.

And next question, please. I think from the line of David.

David Hayes, if you can hear me.

That you, go ahead.

So I'm going to ask the Ben & Jerry's question if I can with the article that we saw in the week just to put some clarification on this situation that continues to obviously link your off in the media. So just to understand, is Magnum discussions at a price? I guess, everything's got a price if something was offered for Ben & Jerry's that covered stranded costs and was just to be true. Is that something that you would engage in? Or is there a certain circle or not? And I guess, just to also clarify, that is the only circumstance that, that discussion will take place. There's nothing that we should be aware of in the agreements that mean that an offer that comes in needs to be entertained for any other reason than a commercial approach.

Now let me start very simply. Ben & Jerry's is not for sale, and there are no offers. As you have read you have read the article more correct correctly. Ben and Jerry is absolutely flying. We had a double-digit growth quarter. Year-to-date driven by innovation in the handheld formats, our occasion-based growth strategy of Magnum Ice Cream Company is working for Ben & Jerry. So Veneer is flying. They are very etch in all their campaigns. Nothing has changed. We have a new independent board installed. We have a variant to chase leadership team. No, it's embedded, it's working, it's growing. It has always been noisy over the year. Ben is still trying to create noisy Actually, you could ask yourself the question, is that actually bad for the not when you look at the sales figures.

Okay. So time for the next question for Guillaume, please go ahead with your question.

Guillaume Delmas here at UBS. Peter, Abhijit, Lloyd. My question is on Turkey release, a key country for you. Peter, can you maybe talk about what you saw in the third quarter in Turkey and particularly to what extent you've been able to compensate for all these measures imposed by the Turkish Competition Authority. And are these measures having a significant impact on your margins there because Turkey tends to come in above group average margin. So any color on what you saw in Q3 and the outlook for Turkey would be great.

Great question. Why is Turkey such a special country because over time, we were able to get consumption up from 0.5 liters ahead to 7 liters ahead, which is almost the German level. How did we do that? It's innovation-driven, penetration driver, bringing new occasions and extending distribution to when you go on holiday in Turkey, basically, there is literally OBIDA at arm's length to stators coke at arms legs. This year, Turkey had an unbelievable runway innovation, whether it's the bulk con, whether that is their new scoopable take-home range, whether it's the new Cornetto program. It's -- honestly, it's one of our best innovation machines. When we got to intervention, which obviously we implemented in Q2 to reduce to keep 30% of the shales empty in smaller outlets. We basically did the following. The team focused on building new sales channels. We built up 3,500 units scooping business around Turkey, we extended our market shares in a counter actually quite successfully. We opened more out-of-home outlets, the smaller type and there's some smaller outlets. We extended the size of the cabinets that we could still sell our former portfolio. This basically led to a very satisfying performance in Turkey, where we basically hit all the original growth targets and with that, all the leverage. But more importantly, most of the innovation we put in was actually quite premium innovation, so which had a good impact on the margin. No. So Turkey is an outstanding space, and we continue to work with the authorities to help them with their program.

Okay. So moving to the next question over to you, Sam, from Goldman Sachs.

Congratulations as well on the results today. I just wanted to kind of dive into your comments on innovations. Firstly, thank you for quantifying the impact that it's had for this year. Is that similar to historical years? Or have you really seen a step-up in 2026 versus history? And how is that comparing with the market? And then just kind of thinking through to 2027 and beyond. We've seen a real step up at least as a consumer, I've seen that on the shelves a real step-up in genuine innovations from Magnum, how do you make sure that essentially you still have new exciting formats and flavors that stay relevant and that it doesn't become too crowded? How do you manage that?