管理層發言
Good morning, and welcome to The Magnum Ice Cream Company Webcast for the Full Year 2025 Results. My name is Heidi, and I will be your operator for today's call. Before we begin, please note that today's presentation is being recorded. With that, I am pleased to turn the call over to Michele Negen. Michele, please go ahead.
Good morning, everyone. Welcome to The Magnum Ice Cream Company's First Full Year 2025 Results Webcast. My name is Michele Negen, Head of Investor Relations, and I'm here today with our CEO, Peter ter Kulve; and our CFO, Abhijit Bhattacharya. The press release and investor presentation were published on our Investor Relations website this morning. The replay and full transcript of this webcast will be made available after the call as well. Before we start, I want to draw your attention to our cautionary statement on the screen. You will also find this statement in the presentation published on the website. In a moment, Peter will talk you through the key elements of our performance in 2025 and how we are executing on our strategy. Abhijit will then look at the financial performance in further detail by talking you through revenue, profitability, cash flow and looking at the financial outlook for 2026 before Peter closes. After that, we will open the floor for questions. So Peter, over to you.
Good morning, everyone, and thank you for joining us today. I'm pleased to welcome you to The Magnum Ice Cream Company's first full year results call as a separate publicly listed company. This is an important moment for our business as we present our performance as a focused global ice cream company and outline what we're going to do to position TMICC for sustainable, profitable and competitive growth. 2025 was a foundational year for Magnum. It was a year of operational and strategic progress and delivery against a challenging macroeconomic climate and serious headwinds from commodity inflation at an unprecedented level of 380 basis points. At the same time, we completed the demerger and set up the business with the right structure, governance and most importantly, talent and culture to drive accountability and profitable growth. In headline terms, we delivered a solid performance in 2025, with full year organic sales growth of 4.2%, and I was particularly pleased that volume grew by 1.5%.
Every region contributed to growth with market share gains across most markets. This was supported by improved availability, innovation, strategic pricing and operational rigor. To build on the volume growth in 2024, we made the decision to price competitively across brands and geographies to enable volume growth despite this intense cost inflation. In the year, we also right priced our portfolio in several geographies and corrected trade margins in China and Southeast Asia. These actions were geared towards getting our business fundamentals in the right shape, and it worked. Forex movements and TSA-related cash costs affected adjusted EBITDA margin. But excluding these impacts, adjusted EBIT at constant exchange rates was up by EUR 48 million as disciplined execution of our productivity program supported by select pricing actions partially offset the impact of commodity price inflation.
The strength of the Magnum brand was evident as we maintained volumes despite price increases to mitigate cocoa inflation. Before I talk about our strategy and performance in more detail, a word on quarter 4. The final quarter of the year is our smallest quarter, representing around 15% of full year sales. Many of our typical faster growing away-from-home markets, such as Turkey and China, have a limited contribution in this period. In these markets, we used this time of the year to take back cabinets and trade stock to get the cabinet fleet ready for next year's season. As a result, in Q4, the Americas drive over 50% of Q4's revenue compared to around one-third for the full year. This year, disruption in food stamps in the U.S. and a late start to the Brazilian season impacted the fourth quarter. While we continue to outpace the category, both in the Americas and globally, it was more challenging, which led to a decline of less than 1% OSG in the quarter.
As this is our first results call since the separation from Unilever, I want to take a step back and remind you of the market opportunity and strategy we outlined at the Capital Markets Day in September. The ice cream market is resilient. In many ways, we are the lipstick of foods. I just returned from Brazil, and it was interesting to hear direct from consumers that even economically challenged families make space for ice cream in their family budget. In 2025, the market continued to grow by 3% to 4%, in line with the last 10 years. This growth was again driven by penetration and distribution build in emerging markets, in more developed markets by the trend from larger to smaller and more premium handheld portions and increasingly better-for-you, high protein, local, real fruit products. Our thinking on GLP-1 has evolved even since the Capital Markets Day in September based on the premium treat substitution effect.
When people eat less overall, the question is which treat is the winner. And the data is telling an increasingly clear story. When on GLP-1, people still treat themselves and ice cream is a very competitive treat. The category premiumizes as people choose smaller portions, better quality and when on offer, more real fruit and protein. We believe that GLP-1s will accelerate the premiumization of the category, which is good for Magnum. Furthermore, as consumers using GLP-1s are eliminating low-quality munching categories first, categories like premium chocolate, premium ice cream and protein snacks could gain share in the overall snacking market. Increasingly, these trends are guiding our innovation and portfolio strategy, and you will see that come through today. Our vision for TMICC in this market is simple. We want to make the most loved ice cream in the world to grow the market and build a highly competitive snacking business for our shareholders and customers because life tastes better with ice cream.
And we're going to do that by delivering our strategy to grow the ice cream market as category leader. Our plan is built on three pillars: growth; productivity; and reinvestment. As its course, that means combining the strengths of our brands with a business system designed specifically for ice cream, enabling faster decision-making, sharper execution and disciplined capital allocation to maintain an investment-grade balance sheet. Our growth strategy is built around growing consumption occasions with market-making innovation, pricing competitively across all snacking and refreshment price points, rolling out premium brands internationally and taking the multi-format, driving digitally led demand creation and massive out-of-home visibility, increasing our availability across channels, especially e-commerce and in emerging markets away-from-home. Importantly, this growth is enabled by a EUR 500 million productivity program that resets our supply chain and structural cost base.
This gives us the fuel to reinvest behind our brands, capability and leadership through disruptive innovation, increased demand creation and best-in-class digitized execution. The strengths of our portfolio, channel management and global footprint give me confidence in our strategy and our ability to win in the market. We own some of the most iconic brands, Magnum, Ben & Jerry's, Cornetto, and then, of course, what we call the Heartbrand, which encompasses brand names like Good Humor, Ola, Algida, Wall's and sub-brands like Solero, Calippo, Carte D'or and Twister. The strength of our brands has translated into leading market share positions across most channels in our core markets and critically in the fast-growing digital channel, which is growing double-digit. So we have a well-balanced portfolio, world-class brands that grow ahead of market, clear growth opportunities through our presence in fast-growing emerging markets and in established markets like the U.S., our biggest, China, the U.K., Germany, and next to that, a very strong channel footprint.
Our performance in 2025 reflects the success of our strategy and the choices we made. A core pillar of that strategy is winning through scale, innovation and premiumization, not as one-off launches, but as a repeatable growth engine. In 2025, that engine delivered across our leading brands, combining premium formats and stronger execution to drive growth and share gains across the vast majority of our key markets, including the U.S.A., our biggest. Magnum outperformed with the launch of Utopia and BonBons. Ben & Jerry's gained share in the U.S. and Europe across the at-home and away-from-home channels with its unique socially led digital model, sustaining strong relevance. Cornetto grew ahead across its top 10 markets, supported by the Cornetto Max and a new stick format in China. And the Heartbrand grew through socially first excavations with our multilayer stick architecture now scaling from Asia into Europe to secure a first-mover advantage.
We are also extending this engine into the formats shaping the category, better for you and portion control. Yasso grew over 30% in 2025 as we expanded into the new formats in the U.S., while Breyers CarbSmart continued to grow. We also moved Magnum and Ben & Jerry's into bites, and we are extending this to other brands, including Solero and Cornetto. Finally, we are getting faster from idea to launch. Magnum Dubai chocolate in Turkey was delivered in six months from concept to shelf. But as all of us know, it's not just about innovation. It's about execution in market. Most markets are seeing meaningful channel shifts with growth moving to digital, convenience and value-led formats. Our strategy is to win where the mix is shifting and availability expansion across channels progressed significantly in 2025. We were an early mover into digital commerce, and it remained our fastest-growing channel, delivering double-digit growth.
In China, it is already more than 20% of our sales. Click & Collect is going from strength to strength in the United States and many European markets. In at-home, we grew mid-single-digit by stepping up customer execution with a new fully dedicated TMICC sales force, which enabled us to gain better shelf positions and promo effectiveness, whilst executing improved customer growth plans across markets. Away-from-home achieved mid-single-digit growth. This was supported by the second year of cabinet fleet expansion in relevant markets, progress on route-to-market digitalization and a stronger frontline organization. Alongside delivering growth, we continue to successfully execute our productivity program across supply chain transformation, overhead reduction and tech-enabled productivity, delivering EUR 180 million further savings this year. This is on top of the EUR 70 million savings delivered in the second half of 2024, bringing cumulative savings to EUR 250 million.
Key actions included reducing SKU complexity and focusing resources on our most productive innovations. We freed up capacity for our global brands in local markets and invested in our factories to remove capacity constraints and hasten innovation speed to market. We are also making significant progress in reducing under-the-skin complexity, strengthening demand forecasting and seasonal planning using advanced weather forecasting models, which are being integrated into our planning systems, driving end-to-end cost discipline across procurement, logistics and overhead. This was evident across the regions, but particularly in the Americas. The U.S. end-to-end supply chain reset enabled growth and realized efficiencies and cost savings through factory modernization, distribution optimization and improved procurement, continuing the process of exiting RTSA as planned with an expectation to be complete by the end of 2027.
These actions are not one-off. They are structural improvements that will continue to benefit TMICC in the years ahead and fuel our reinvestment strategy to power the flywheel of long-term growth and profit improvement. We are reinvesting for growth and productivity. Cabinets are a key part of this as a critical enabler of growth and sometimes overlooked or misunderstood moat in our business. Our cabinets are like soft drinks chillers. They provide unique advantages that help us to maintain and grow market leadership. In 2025, we increased cabinet CapEx by around 10% to grow our market-leading fleet of 3 million cabinets. And we began deploying new technology to better forecast out of stock and to spot trends. The impact of our growth strategy, combined with improved execution was proved out in each of our regions. In the U.S., our biggest market, we gained share for the second consecutive year, 24 basis points, and we are solid #1.
We delivered organic sales growth of 1.7% and volume growth of 1.8%, which is high in the U.S. snacking industry. 2025 was a year of significant operational progress in the U.S. We finalized our organization with a dedicated ice cream sales force. Disciplined execution of our productivity program helped us to become cost competitive and reenter the club and value channel with good progress, but we have more to do. Joint customer plans with key omnichannel partners like Walmart and Target delivered strong results across store and digital channels. Ben & Jerry's and Yasso grew double-digit in e-commerce on the year. And our performance on Amazon went from strength to strength. In Europe, Australia and New Zealand, strong performance in the U.K., France and Spain led to an OSG of 3.3% and market share gains for the second year in a row with 37 basis points in 2025. Growth was driven by strong innovation and brand performance, but critically was enabled by operational rigor, improved physical availability, new value channel listings and strengthened partnerships with key retail customers.
Our performance in Italy is still a work in progress, but the performance in the U.K. was truly outstanding. We not only drove strong sales, helped by favorable weather, but also took share. Overall, it may not have felt like that in London, but the weather index in Europe and ANZ was close to the long-term average. EMEA delivered double-digit growth of 10.9%, with 4.5% volume growth and share gains. Turkey and Pakistan delivered double-digit growth. In Turkey, premium innovation and better distribution in the HoReCa channel drove volume growth. In Pakistan, growth was driven by an expansion of cabinets, seasonal packs and snacking formats. As mentioned before, in China and Indonesia, we delivered high single-digit growth and share gains by improved channel and customer execution, including right-setting trade terms and a strong innovation program. It was the first time that a Chinese concept, the multilayer stick has become a global innovation.
Looking ahead, while the external environment remains uncertain, the ice cream market has good momentum, and we have a strategy that continues to deliver. We also have an exciting pipeline of innovation landing in 2026. As I said during the Capital Markets Day, the ice cream category had gotten a little bit stuck in nostalgia and creamy indulgence, and we are clear on the opportunity of bringing modern snacking and refreshment benefits to the ice cream category. There are four distinct pillars to our innovation strategy, which I will talk you through. And on the slides, you will see some of the fantastic new products we are bringing to market in the year ahead. Firstly is core superiority. We carefully benchmark every single core product versus the competition and continuously improve where appropriate. Over the last 18 months, we have relaunched 80% of our core products and have invested in better ingredients and formulations.
Secondly, we perfect the portfolio by sharpening the right mix of format, flavor, pack and price to match occasions and channels. Especially in the U.S. and Europe, the teams have made great progress in optimizing our portfolio. Third is the global rollout of our premium brands and a deliberate strategy to take their core brand promise into new formats to unlock incremental penetration and usage. The last pillar is category expanding innovation, taking ice cream into new benefit areas such as better for you. For example, we are launching a hydration ice cream, scaling protein propositions, introducing new high fruit content ices, and investing in nascent sugar replacement technology. In regards to outlook, the ice cream market is expected to grow between the 3% to 4%. We expect organic sales growth for 2026 to be between 3% to 5% with underlying margin improvement. Now I will hand over to Abhijit, our Chief Financial Officer, who will take you through the financial performance in more detail. Thank you.
Thank you, Peter, and good morning, everyone. I'll walk you through our financial performance for 2025, focusing on revenue, profitability, cash flow, capital allocation and our financial outlook for 2026. Starting with revenue. For the full year, TMICC reported revenue of EUR 7.9 billion with an organic growth of 4.2%. Price contributed approximately 2.6 percentage points, reflecting disciplined revenue management and selective price increases to partially combat material price inflation. Most encouragingly, volume and mix was up by a healthy and competitive 1.5% despite cautious consumer sentiment in some markets, primarily the Americas. Innovation contributed meaningfully to growth in our premier brands, as Peter just highlighted with several super examples. Geographically, all three regions contributed to growth for the year. Europe, Australia and New Zealand delivered a solid growth of 3.3%, led by strong innovations, a disciplined and strategic approach to pricing and improved execution in core markets, including stronger customer relationships and new value channel listings.
Our productivity program delivered EUR 72 million of savings as planned. The adjusted EBIT margin in the region declined operationally by 70 basis points and an additional 30 basis points due to lower royalties. Operational profitability in the region was impacted primarily due to raw material price increases, mainly cocoa. In addition to these factors, previously allocated depreciation costs, which are charged as cash cost from the second half of 2025 due to the transitional service agreements, impacted the adjusted EBITDA margin by 50 basis points. Now let me move to EMEA, which is Asia, Middle East and Africa. EMEA grew by double-digits with strong momentum in many of our markets, notably Turkey, Pakistan, China and Indonesia. Across markets, we have expanded availability with more cabinets, met key snacking price points and continue to land premium innovations, including Volcanics, our first premium multilayered stick in Asia and Turkey.
Profitability was impacted by rising cocoa prices and hyperinflation in Turkey. The Americas was resilient with continued market share gains and distribution expansion. In the U.S., we expanded availability with new value channel listings and more cabinets and helped to grow the market with premium ranges in higher growth segments. This led to strong volume growth in the U.S. of 1.7%. In Brazil, we have reset the team, our promotional and pricing strategy and invested in cabinets, and we are seeing early signs that this is working. On an adjusted EBIT basis, margin was up 10 basis points for the region as the productivity program more than offset the inflationary impact of raw material prices. On an adjusted EBITDA level, the reduction of 60 basis points was primarily due to the impact of depreciation becoming a cash charge due to the start of the transitional service agreements in the second half of the year.
Now turning to profitability. Year-on-year on a reported currency basis, adjusted EBITDA declined by 100 basis points, of which 50 basis points was due to the translation effect of currency and 50 basis points due to the commencement of the transitional service agreements with Unilever in the second half of 2025, where depreciation charges will be charged as a cash cost during the period of the TSAs. To give you a bit more color, let me start with gross margin, which was resilient, but impacted by commodity and other supply chain cost inflation in 2025 of 380 basis points, primarily due to significant cocoa inflation. Selective pricing actions had an impact of 230 basis points, which helped offset part of the commodity headwinds of 380 basis points. Supply chain productivity savings of 170 basis points, together with the pricing actions that I just mentioned, more than offset the massive commodity headwinds.
In addition, there was a negative 50 basis points impact from FX translation. Therefore, operationally, excluding FX, we were able to improve gross margin by 20 basis points, while the reported gross margin was down by 30 basis points. Secondly, our SG&A cost increased by 20 basis points, primarily due to double running costs as we ramped up our group functions, reinvested in our front line with more dedicated sales representatives and other strategic investments, for example, resetting the route to market in Italy. Our overheads productivity program delivered savings of EUR 40 million, which offset inflation for the year. These savings were driven by organizational simplification, tight control of discretionary spend, productivity initiatives across the functions. Importantly, we achieved this while continuing to invest behind our brands, particularly in marketing and innovation. So to conclude, although the adjusted EBITDA declined in the year due to the factors just mentioned, our underlying performance was resilient as adjusted EBIT at constant currency increased by EUR 48 million as the significant raw material headwinds were more than offset with productivity savings, pricing, premiumization and operating leverage.
I'd like to spend a bit of time to help interpret the cash flow for the year, given that we are operating on an interim operating model till 2027. Let me draw your attention to the next slide of the deck. The first thing is to make the free cash flow of 2024 and 2025 comparable. Since we were part of Unilever in 2024, we had very low interest cost as the interest cost for 2024 only covered entities dedicated to the ice cream business. In addition, due to the operation of the transitional service agreement with Unilever, depreciation costs are now part of cash costs charged to TMICC; hence, the so-called comparable free cash flow for 2024 is EUR 660 million. The comparable number for 2025, excluding separation-related costs, is EUR 602 million. The difference of EUR 58 million comprises of two items: higher CapEx of EUR 31 million, of which around one-third is from additional cabinets and the rest for capacity and productivity; and number two, the negative translation effect of foreign exchange of EUR 27 million.
Our cash flow further had the effects of the demerger costs and the transitioning of to the interim operating model, which amounted to EUR 564 million, leading to a net free cash flow of EUR 38 million. We ended the year with a net debt-to-adjusted EBITDA ratio of 2.4x, in line with our stated capital allocation policy. A brief word on the effective tax rate. The effective tax rate as reported is 31.3%; excluding the impact of adjusting items such as hyperinflation, which is non-cash and non-deductible VAT arising from the separation, the adjusted tax rate for the year was 26%, which is in line with our medium-term plan of 25% to 27%. For the year 2026, we expect the adjusted effective tax rate to be around 27%, at the upper end of our midterm plan. I would like to provide some clarity on our perimeter. We had three entities that didn't transfer to us on December 6, 2025, the demerger date.
Subsequent to that date, we've had the Indonesia business transferred to our company. We have secured the necessary permissions for the listing of the Indian business, and it will be listed in the stock exchange in India by around the middle of this month, which is earlier than planned. We then expect to acquire the Indian business in the first half of this year, subject to regulatory approvals. The last business that will move to us will be the Portugal business, which is expected to be acquired by us in the first half of this year. So our plans are now firmly on track. We issued our debut bond on the 19th of November 2025 and received a good response. Our offer was oversubscribed by over seven times, and we were able to secure our financing needs as a stand-alone company at very competitive interest rates. In order to help you with your modeling in the initial years of us being a stand-alone company, I would like to give you some estimates for the year.
We expect net finance costs to be around EUR 180 million for the year. We expect adjusting items for the year to be in the region of EUR 425 million to EUR 450 million, primarily for cost to build our new IT stack as well as separation and restructuring expenses. Going forward, we will publish on our website a company compiled consensus on a half-year and full-year basis. We will also publish the exchange rate impact based on actual movements in FX rates expected for the next half-year after this call, and publish an update just before the end of the half-year and the full-year. Let me finish by giving you the outlook for the year. Looking ahead, while we are mindful of macro uncertainty, our expectations are as follows. We expect organic sales growth for the full year 2026 to be between 3% to 5%, with the ice cream market expected to grow between 3% to 4%. For the full year 2026, we expect adjusted EBITDA margin improvement of 40 to 60 basis points on a comparable perimeter basis.
The reported improvement in adjusted EBITDA margin is expected to be 0 to 20 basis points, primarily due to the impact of the anticipated acquisition of the India business in the first half of 2026. We expect the improvements in the year to be weighted more in the second half of 2026 due to the phasing of TSAs and commodity prices. Peter, back to you.
Thank you, Abhijit. To close before we go to the Q&A, we operate in a market that is large, is growing ahead of core foods, is highly resilient and has attractive returns. We are the largest ice cream company in the world with 160 years of expertise and heritage. We have a portfolio that is well positioned for growth with world-class innovation and strong brands, channel positions and geographic footprint. As a new stand-alone company, our governance is in place and operating effectively. We are building a strong frontline focused organization with the capabilities and culture to capture the market and value opportunity. We have a clear strategy to deliver growth and improve productivity, and we are delivering on it with a solid full year operational performance that has proven that we can cope with even extreme input cost shocks. The day we listed in many ways was the end of the beginning. Now the hard work begins, but we are ready as an energized, as one Magnum team to deliver. We will now take your questions.
分析師問答
We will take our first question from Warren Ackerman at Barclays.
Hopefully, you can hear me okay. This is Warren Ackerman from Barclays. I have one question and one follow-up. My main question is about the EBITDA margin guidance, as I believe the sell-side has a broad range of estimates. You mentioned a range of 0 to 20 basis points on a comparable basis. Could you provide expectations for India? Last year, India reported EUR 200 million with 0 EBITDA. What are your projections for India after the buyout? Also, what will happen regarding the India royalty, as I understood there was also a 20 basis points headwind on EBITDA in 2026? I'm trying to get a clearer picture of this TSA phasing and commodities. It remains somewhat unclear to me. For my follow-up, I'm interested in the outlook for pricing. Peter, we've noticed that snacking prices are significantly decreasing in the U.S. among some food peers. Your commodity costs, particularly for cocoa, are also declining, and you have a depremiumization strategy aimed at mass and value markets. These factors suggest that pricing might be trending downwards. Do you foresee a scenario where Magnum's pricing could be negative overall in 2026? If you could address this pricing aspect and explain how the price-volume equation fits within the organic sales growth guidance of 3% to 5%, that would be helpful.
Thank you for the insightful questions. I will begin by addressing the pricing topic, then share some insights on India, and finally, I'll let Abhijit discuss the perimeter. This year, our raw material costs increased by 380 basis points. We chose not to pass all of that cost to consumers and instead reinvested 230 basis points of our structural productivity savings to maintain our competitive edge, which proved effective as we saw growth in both volume and value. In the U.S., for instance, we grew volume by 1.8% and value by 1.7% without significant pricing increases, which was a strategic decision. Our portfolio in the U.S. has less chocolate, and I anticipate our pricing will remain steady with growth primarily driven by mix and volume. I'm quite optimistic about our pricing in America and the difficult choices we've made this year. In Europe, we did implement some price increases for Magnum, but not entirely, so I expect stable prices in the Chocolate segment with more growth driven by volume than value.
In emerging markets, I expect a mix of solid pricing along with the usual volume growth we see. Overall, our pricing environment should remain stable, as we haven't increased prices to the extent seen by some competitors in the industry. Regarding China, I've previously worked there, and if we compare the Indian market, it resembles China in the early '90s or Turkey in the late '80s, with very low per capita consumption but a rapidly growing economy. Consumption is increasing swiftly in urban areas and gradually in secondary and tertiary cities, making it a significant growth opportunity. Currently, India is the largest dairy market globally, and I wouldn't be surprised if within 20 years, it becomes the largest ice cream market, surpassing the U.S. We're in a fortunate position in India, despite the challenges faced over the last two decades, where our business has not been very successful, losing market share and facing flat profitability, which even declined last year. Now, we are in a turnaround phase, and we feel extremely fortunate to have this business as a foundation to build a leading presence moving forward.
Thanks, Peter. Let me explain the guidance a little bit. So what we have said is for the existing perimeter, right? So that is for the Magnum Ice Cream Company before the acquisition of India and Portugal, we expect profit to go up in the 40 to 60 basis points range. Now as you mentioned, the Indian business is around the EUR 200 million turnover. But because we are making investments there, it will come with a loss-making P&L. And that causes the headwind on one side. And then because the India business was not part of the perimeter, it was paying the Magnum Ice Cream Company a certain amount of royalty because they were using our brands. Once it becomes part of our perimeter, that royalty will stop as well. And that's why we said that, that will cause a headwind in total, both because of the negative profitability of India and the stopping of royalties will have an impact such that the reported numbers that you see in 2026 in a perimeter that is including India and Portugal will be in the 0 to 20 basis points. Does that clarify on the EBIT, then I take your question on the TSA phasing and commodities, Warren?
Yes. And sorry, just on the final piece on the technicals and the noncash cash depreciation, is that still 20 bps headwind in '26 as well, just on the...
Yes.
So it's 80 bps of technicals, 40 bps India, 20 bps royalty, 20 bps depreciation?
Exactly. Exactly. And that is what I had explained in the earlier call that we did together with the sell side. Then on TSA phasing and commodities, so the way it works is, of course, we have started with TSAs from the 1st of July last year. It phases out over time because as we build up our own organization, we stop services from Unilever that is done in a proper schedule that we have agreed between the two companies. So as we go through 2026, our TSAs during the year will come down. And then in 2027, they will come down further, and then we will exit all TSAs by the end of 2027. The phasing of commodity prices, we expect some benefit, but it will come in the second half of the year because, as you've also heard from many other companies, all the cocoa prices have now come down. A lot of us are hedged already at higher prices. And that's why we've said that the improvement in our performance would be more second half weighted.
We will take our next question. Your next question comes from the line of Celine Pannuti from JPMorgan.
My first question is about understanding the TSA for '25, particularly the unexpected 50 basis point adjustment. With the TSA impact considered, your analysis shows a net negative of 20 basis points on SG&A, and there was also a noncash element. Could you clarify this, as it seems to be new information? Additionally, regarding your expectations for margins, foreign exchange, tax guidance, and net income, how should we assess EPS year-over-year? Are we anticipating a decline? My second question relates to the overall market environment. Peter, you mentioned that pricing should remain positive, but it appears that volumes in Europe were still negative in the fourth quarter, albeit a small quarter. You also noted that the U.S. market is facing challenges. I'm trying to reconcile your projected market growth of 3% to 4% with the apparent weakening in developed markets in the fourth quarter. Could you shed some light on that?
Let me address Q4 first before passing the difficult questions to Abhijit. Overall, we exceeded our expectations with a 4.2% growth for the year, driven by a 1.5% increase in volume share, particularly noting a strong third quarter. It's important to highlight that in 2024, we achieved over 9% growth and 4% on top of Q3, making Q3 the standout quarter for us. Regarding Q4, in our seasonal out-of-home channel businesses, we focused on optimizing the system by retrieving and replacing cabinets, and refining our distributor strategy to start 2026 on a strong footing. In the Southern Hemisphere, Indonesia and ANZ showed particularly good performance. China had similar seasonal trends to Europe, but Indonesia and ANZ excelled. The Philippines experienced some softness due to unseasonal typhoons, while Brazil had a slow start to the season, picking up only in December. We noticed that with the beer companies as well, as the season truly got going in December, following a weak prior year.
In Europe, we adjusted our promotional strategy last year, prioritizing promo pressure in Q2 and Q3 for better returns, which has resulted in solid volume and value growth, culminating in a 3.3% overall growth and a promising 1.2% growth in Europe. The U.S. market had a strong start in early October but softened towards the end of October and November, particularly impacted by the government shutdown and food stamp issues. However, we saw a rebound in the final weeks of December when market momentum returned. With all of this considered, I’m not concerned about any structural issues in Q4 that would affect our outlook for 2026 and our market predictions. I hope this clarifies things, Celine. Once you’re satisfied, I will turn it over to Abhijit. Are we good? I assume yes.
Let me clarify the margin expectation and tax guidance. First, regarding the increase in SG&A in the second half of this year, there were two significant factors. One was the double run cost, as we were expanding our organization while taking over functions from Unilever, which added extra costs. The second factor was the temporary service agreements that included a certain tax markup. Together, these factors increased our overheads by 20 basis points. The additional 50 basis points were unexpected and relate to the depreciation previously allocated from Unilever, which was classified as a noncash cost before the separation. Consequently, we deducted this from EBITDA. However, under the service agreement, Unilever charges this depreciation as a cash cost, resulting in a technical impact on EBITDA since it transitioned from a noncash to a cash cost during the service agreement period. As for EPS, we are not providing guidance due to various factors, including separation costs. However, if you consider an adjusted EPS for the year, excluding foreign exchange effects, we expect a slight growth in earnings, helping the EPS to remain flat or increase slightly on an adjusted basis.
All right. That includes the tax rates being higher and the net financial costs as well?
Yes, yes.
Next question?
The next question comes from Jeff Stent from BNP Paribas.
Two questions, if I may, both very simple. The first one, could you just clarify whether or not 2025 profits, i.e., EBIT, EBITDA, were actually in line with your expectation? And the second one, just to clarify the last point, you said taking out FX, you expected that EPS would be flattish. What do you expect based on current FX, what sort of adjusted earnings will do just as current FX stands?
Thank you, Jeff. Regarding your first question, yes, we anticipated the significant cost inflation we faced at the beginning of the year, and our plans accounted for this. Ultimately, we reached our expected outcome, largely due to the successful execution of our productivity plan. Without that, we wouldn't have been able to achieve our pricing strategy and would not have seen slightly positive EBIT. For your second question, Abhijit, it's over to you.
Yes. Regarding the 2025 EBITDA, we had already noted a decrease of 30 in the first half and anticipated no improvement, possibly even a slight decline. That's why the decrease only worsened to 50, and the additional 50 basis points reflects the depreciation I described earlier. Predicting foreign exchange rates is quite challenging. In the coming week, we will share our FX expectations for the year, but those are subject to change because if we could predict them accurately, we'd be in a different business. When we mention a flat EPS, it could vary a little, either slightly up or down, based on the year's end, but there won't be a significant drop in adjusted EPS. We'll provide more information on the FX impact next week.
We'll take our next question. Your next question comes from David Woo from Morgan Stanley.
Just 2 questions from my side. Firstly, on the margin. If we take a step back and we look at the two main components of your medium-term margin expansion ambitions, you've got the cost savings and you've got the reinvestment. By the end of 2025, it looks like you've hit about 50% of your cost savings targets on a cumulative basis. Just out of interest by comparison, how much of your reinvestment spend have you done by the end of '25? And then I'll follow up with the next one.
I will hand over, but let me briefly summarize what we did this year. Our focus has been on operating the business based on long-term fundamentals to achieve volume and competitive growth. In response to the unprecedented 380 basis points inflation last year, primarily in dairy and chocolate, we decided to reinvest our 230 basis points of productivity savings to maintain competitive pricing. This was a strategic choice. We had extensive discussions internally about whether to prioritize profits at the expense of volume growth and market share. Ultimately, we opted to invest in the business's competitiveness and, as we have discussed, work on improving our volume growth for the second consecutive year. This decision significantly influenced our profitability this year. Now, I'll pass it to Abhijit for further insights.
Yes. Regarding the reinvestment, there were two main aspects to consider. First, we increased our capital expenditure. Last year, we finished at around 4.5%, up from a previous range of 3.5% to 4%. This increase is proceeding as planned. The second aspect involves investing in our sales force by adding 1,000 dedicated salespeople, which has been completed. Lastly, we also mentioned enhancing our advertising and promotion expenses in two ways: first, by improving the efficiency of the 12.5% we currently spend, and second, by increasing that amount if needed. You may have noticed our new collaboration with Publicis, which provides us significant leverage and efficiency in our spending. Once we optimize that partnership and determine the need to invest further, we have the capacity to do so in the upcoming years.
Okay. That's clear. So just to clarify, so on the sales force as a percentage of revenue, the cost for the sales force will come down a bit from 2025, given those double costs you spoke about?
Yes, the double cost is not related to the sales force. The double cost primarily pertains to the support functions. For instance, if we have 50 people handling payables from Unilever, we need to establish an organization of 50 individuals. They must learn the processes from Unilever while Unilever reduces its workforce. That’s where the double cost arises.
Okay. So your headcount on the sales force is at steady state by the end of 2025, right?
Yes.
Our business is heavily driven by demand creation. When we determine that increasing demand support is essential for growth, we will pursue that strategy. If adding more salespeople correlates with higher sales, we will invest in it. We aim to keep our head offices, regional offices, and back offices as streamlined as possible while allocating resources to the front line, where they can effectively drive turnover growth.
Okay. That makes sense. And then just briefly on my follow-up question. You mentioned taking out some cabinets in Q4. Can you quantify the impact of this on OSG in Q4? And then how should we think about the phasing on the 2% growth in cabinets...?
It's basically what we do. In certain markets, like a convenience store or 7-Eleven, the cabinets stay at the outlets, and during the low season, they don't sell much. In other markets, we pull back stock from small stores and leisure outlets at the end of the season. We resticker the cabinets, store the stock in cold warehouses, and prepare everything to start the season again. The same applies to regional distributors; we optimize their stock levels to ensure the system is ready for when the season resumes in February, March, and April. This yearly process is fundamental to our operations and requires significant discipline. While it can be tempting to postpone this for a slight increase in sales, we believe best practices involve managing the entire out-of-home network with strict discipline at both distributor and outlet levels. Of the 3 million outlets, I estimate that between 500,000 and 700,000 cabinets return each season, and with our 2,000 distributors, managing this efficiently is crucial to avoid excess stock at the end of the season, which could negatively impact Q1. Therefore, it's an operationally intensive activity that demands a high level of discipline, and we applied a lot of that this year.
Your next question comes from Karel Zoete from Kepler Cheuvreux.
I want to start with a question on cash flow and working capital because I guess this year has been some negative outflows on the working capital side of about EUR 200 million. You already provided more insights in cash flows. But how should we think about working capital going forward? The guide is minus 4.5% of revenues. What are your expectations on cash flow in '26? And then the other question is much more about Latin America. Historically, I think Brazil used to be a good business. What are you doing to get the Brazilian business back on track as well as what you're seeing in Mexico? What are some of the interventions you've made in that market?
That's a great question. I recently returned from Brazil, where I was there just before Carnaval for business purposes. Brazil's ice cream market is thriving, but our Kibon brand, which was once very successful a decade ago, has seen a decline. The issue is that the market has shifted towards more premium and more affordable options, and we've found ourselves caught in between, resulting in a significant loss of market share over the past ten years. To address this, we completely overhauled the management team last year. We also identified that our factories were operating with high waste and low efficiency, but I'm pleased to report that we are making solid improvements in that area. Moving forward, we need to adapt our product offerings in Brazil to be more affordable and premium simultaneously, which will take some time. Last year was quite challenging, but we made considerable progress in December, entering the new season with positive growth. Although I can't comment on this year just yet, based on my recent visit, I can confidently say that we are in a much better position.
Yes. Let me address your question about cash flow. The interim operating model presents some challenges because it involves a complex process where we receive a subsidy from Unilever, which manages our receivables and payables during this period. Therefore, it's more of a temporary cash outflow that will gradually resolve once we exit the transitional service agreements. To clarify, when examining our working capital in terms of days between 2025 and 2024, there has been no change, indicating effective management. We did see a slight increase in receivables days, but we improved inventory days by two. Payables have remained consistent. So, when you look at the operational working capital and the comparable cash flow metrics I presented, you will notice no impact on working capital since we've kept it roughly stable year-on-year. That’s also why we didn’t provide separate cash flow guidance for 2026 and 2027 during the Capital Markets Day, as it's quite challenging at this point. However, for 2028 and 2029, the guidance and outlook for cash flow will stand. We might offer further clarity as the year progresses, but for this year and next, the interim operating model makes it hard to provide a clear outlook.
But stock creditors, debtors is all fully in control, and we are as tight as we ever were.
Your next question comes from Robert Jan Vos from ABN AMRO ODDO BHF.
I have one left in the meantime. Your guidance for adjusting items, it implies a cumulative roughly EUR 750 million to EUR 770 million in 2025 and 2026 combined. If I recall correctly, your guidance was EUR 800 million for the years 2025 to 2028. So I was wondering, are you ahead of schedule timing-wise? Or should we anticipate that the EUR 800 million cumulatively will be exceeded?
Yes, thank you, Robert. Let me clarify. Referring back to the Capital Markets Day, we indicated EUR 800 million in separation costs, including the IT stack. We also mentioned that there would be 80 basis points in restructuring, if I'm correct. The guidance of EUR 425 million to EUR 450 million for next year includes both these elements. Therefore, there is not a significant change in timing; it is roughly in line with what we previously stated, give or take a few million.
Next question comes from Bingqing Zhu from Rothschild & Co Redburn.
I want to shift gears a little bit and ask a couple of questions about EMEA. You experienced solid growth there, and it seems from the presentation that you have maintained or slightly gained market share in that region. Can you discuss the market share performance in EMEA and how the competitive landscape is changing in some markets with strong local players? Additionally, during the Capital Market Day, you mentioned that cabinet penetration in markets like the Philippines, China, and Indonesia is still behind others. Can you provide an update on the progress you've made this year to prepare for the high season next year? I also have a follow-up question.
Thank you for the question. As you know, Asia is a diverse region, so I will provide some details by country. We gained market share in China, which is something I am proud of, as it follows our long-term growth trajectory. We have surpassed most competitors and are now a solid second in the market. Our new organizational structure and sales strategy, along with improved trade margins and a strong innovation program, have contributed to this success. In Indonesia, we faced share pressure for many years due to competition from Chinese Ice, which is tied to our menu offerings. However, with new leadership and a fresh strategy, we managed to increase market share there. The head of our Southeast Asia operations also oversees China, allowing us to leverage our knowledge from that market. We also saw an increase in market share in Thailand after a period of weakness and significant share gains in Pakistan.
I cannot comment on India. In Turkey, we experienced a slight decline in market share, but that was intentional as we chose not to compete aggressively in the value segment. Overall, our market share has grown in the region. Regarding cabinets, China is less focused on cabinets, with more emphasis on e-commerce and convenience stores managing their cabinets. In the Philippines, we expanded our distribution, and in Pakistan, we made substantial increases. In Indonesia, we also made some progress, but our main objective for much of the year was to ensure our distributors had their margin and portfolio well-managed. This summarizes our distribution progress and share gains in the region. I have a strong affinity for this area, having lived in Singapore and China for a long time. While growth is solid, it isn't rapid like in other parts of Asia; instead, we're seeing stable, high single-digit growth, which is still quite good.
That's really helpful. Then my follow-up question is still on EMEA. That is your highest margin region. I understand that's helped by the channel mix. But how much further room do you see to improve productivity in the margin, especially it seems like a lot of focus is on driving top line and with the Indian consolidation being margin dilutive and you mentioned you continue to invest in India being high growth. How should we think about kind of medium-term margin in the region?
The main opportunity to enhance margins in our business lies in Europe and the U.S. We have strong operations in Asia, but like other regions, there's still room to enhance our supply chain through increased automation, improved layouts, and robotics. However, our primary emphasis in Asia and EMEA is on growth. Margins are a focus for Europe and the U.S.
Your next question comes from David Hayes from Jefferies.
So two for me or two areas for me, I guess. Just on the food voucher flag that you made in terms of the U.S., I wonder if you can quantify that at all for the fourth quarter? And then should we think about that as a sort of 3, 4-year dynamic that we take account of? Because, as I understand it, there's kind of a fading of these food vouchers over a longer period of time. And just in terms of the dynamics of it, is this certain states taking out ice cream products from what is eligible for the vouchers? Or is it just an indirect effect that you have got less spend generally in grocery channels, and that's kind of knocking on to their purchase of ice cream? And then the second area is on the freezer rollout. I wondered if you can quantify to what the freezer number went from and to, from the beginning to the end of the year? And it looks like when you look at the quality of the Indian subsidiary slides, that perhaps almost half of the extra freezers are going to be based in India.
Is that right? Or is that an additional number of freezers that we should look at once it's consolidated? And then just a point of clarification still on freezers. Just what you were saying before about the fourth quarter freezer review, it sounded like there's almost a sale and return dynamic in the fourth quarter, which you see in other seasonal businesses that if you don't sell sun cream in certain retailers, then you basically give the money back as a negative sales dynamic in the fourth quarter. Is that what goes on? Is that what you're saying happened a little bit and then that just varies year-by-year in terms of the season success?
Thank you. Most of our activities last year aligned closely with our plans. The government shutdown primarily affected government employees who didn't receive their pay and disrupted food stamp benefits in November, which impacted our business. However, we saw a rebound by the end of December, gaining further momentum. About 6% to 8% of our U.S. turnover comes from food stamps, which is significant across all food categories, making it an important but temporary channel for us. Regarding freezers, India will be a key area for investment. Last year, we managed to negotiate better deals on freezers due to our intensified focus, allowing us to invest more effectively. A large portion of our new freezers is being allocated to higher-return areas. While there aren't many new swimming pools in Germany, there are numerous new outlets and regions in India, Pakistan, and Turkey that we can explore.
In India, we have one freezer for every 2,000 to 3,000 people, compared to one for every 250 in Turkey. As the market evolves, this substantial growth potential will substantially increase our cabinet placements. In response to your last question about cabinets, we tend to place them in various geographies and channels, sometimes pulling them back. This approach is not new; it reflects how we manage these product categories. Similarly, sunscreen businesses may display full racks of products and remove them after the season, only to reintroduce them later. This is not how we handle all our freezers, but it applies to some. We do this to ensure we kick off the year strongly.
Your next question comes from Antoine Prevot from Bank of America.
One quick question for me. So on pricing for Europe in '26, please? I think you said you expect a broadly flat price environment. But I mean, with COGS deflation in 2H that you pointed out, I mean, what makes you confident you will not need some price rollback or reinvestments to remain competitive as you target volume growth there? And ultimately, Europe remains quite a competitive market on price?
Yes. As I said before, this is a business where we believe in volume-led competitive growth, and we have priced accordingly. At this moment in time, we feel that we are well placed in the European context, also analyzing the covers everybody has in the industry. And we do believe that we will still get a little bit of mix growth in Europe, as consumers everywhere. I didn't get the GLP question yet, but as the consumers everywhere going to more handheld units, more portion control, more premium products, so you get mix. But yes, we are price competitive, and we do expect because the European market is actually quite a healthy market, that there will also still be volume growth in the market. So a little bit of price, a little bit of mix and continued volume growth.
Your next question is from Maxime Stranart from ING Bank.
I have one remaining one. Obviously, you closed the deal with Indonesia and transferred that business into your business clearly. However, I don't see any entry on the cash flow statement there for an acquisition. Can you help me understand the dynamics, please?
No, this was simply part of the overall demerger dividend that does not affect the cash flow. It was just a delayed transfer that took place for technical reasons one day after we became a listed company. Therefore, you will not see in our cash flow the prices or amounts we have paid for other markets. You should consider Indonesia just like any other market, with the only difference being that the technical date of transfer was one day after our listing.
Yes. It is different than India and Portugal.
Your final question comes from the line of Guillaume Delmas from UBS.
Main question is on market growth because you anticipate another year of 3% to 4%. But would it be fair to assume that category growth this year should be more driven by volume mix rather than pricing given what's happening on the commodity cost front? And therefore, by extension, does it mean that for Magnum to comfortably reach the 3% to 5% organic sales growth in 2026, your volume growth would have to further improve compared to the 1.5% you've just achieved in 2025? And then my second question, I mean, just a quick point of clarification. Commodity cost-wise, so you've signaled that we should have a contrasted picture between the first and the second half of '26. Just wondering if for the year as a whole, you anticipate commodities to be a headwind or a tailwind?
On the growth, as a global business, we believe that the American market will have low volume, still good mix as the grips drive also the underlying premiumization trend further, a little bit of price. Europe will be still volume-based on the historic trends and mix. And Asia and the rest of the world will be a combination of price and volume. And actually, we expect that the overall global mix, although built up a little bit differently than 3 years ago, will still be into the 3% to 4% growth. What you also get is that certain really fast-growing markets like Brazil and like India become a larger part of the global pie. So this 3% to 4% is pretty robust, and we feel good about our 3% to 5%. And why do we feel good about that? Because we have a good geographic mix. Our portfolio is more premium. And most of the accelerated growth is in the premium segment of the market, handheld, portion control, premium. And, yes, so in this way, we believe that, again, it will be 3% to 5% years. And, yes, our volume growth of 1.5%, it will be 1.5%, 2% this year. And we will think with a little bit of mix and pricing, we'll end up between the 3% and 5% again.
On commodities, maybe good to clarify that 2025 was just a very specific year where we had close to 9% inflation on commodities. We expect that to be significantly lower, maybe in the low single-digit range this year. So there will be a little bit of a headwind, but not anything near as much as we saw last year.
This concludes today's question-and-answer session. I'll now hand the call back to Peter ter Kulve for closing remarks.
Thank you, Heidi. Thank you, Michele. Let me leave you with three messages. First, the ice cream market is healthy and resilient. This is partly due to the lipstick effect and increasingly GLP-1s, which will further premiumize the category. Second, over the last two years, we removed EUR 8 billion in turnover from Unilever and built a company with a driven team, solid fundamentals, and good governance. Our performance was in line with our plan and continues to strengthen. Market shares are strong, with positive volumes across the board, and we have maintained good profitability, as evidenced by how we managed the 380 bps cost spike this year. However, we still see this as day one, and I intend to keep that perspective. Thank you very much for being here today. I look forward to connecting with many of you in the coming weeks and months. Goodbye.
This concludes today's conference call. Thank you for participating. You may now disconnect.