The upcoming spin-off of Unilever PLC's (LSE:ULVR) ice cream division, The Magnum Ice Cream Company (TMICC), is not likely to materially increase the Anglo-Dutch group's overall value, analysts at RBC Capital Markets said.
For the FTSE 100 group's remaining operations, RBC said it is "not convinced" that the demerger will enable the organic revenue growth rate to be lifted to the guided 4-6% mid-term range.
"It is true that the spin-off gives management better focus on its ambition in the Beauty & Wellbeing segment, but the company is removing the most competitively advantaged business from its portfolio."
The bank estimates the demerger could result in an 11-13% dilution to group EBITDA.
Unilever's rating remained at 'underperform', with a price target of 3,900p.
For the spin-off
For Magnum Ice Cream, which is due to begin trading as a separate company by the end of the year, the analysts believe it "represents a different equity story to Unilever, with a focused portfolio, clear market leadership and high developed market exposure".
Management of TMICC held a recent presentation for the City, where they said the core strategy will be to invest more into the business to revive both growth and productivity.
"We believe that there is room for the company to drive its share momentum further, following years of under-investment.
"However, we think the outlook will be different for each channel."
The out-of-home business is a "bright spot", offering stronger growth and margin outlook than its at-home operations, while its more weather-resistant at-home channel faces strong competition.
The away-from-home channel could support margin expansion ambitions, alongside a productivity programme and volume growth, but margin improvements will "not come in a straight line" as transitional service agreements with Unilever roll off.