Top UK Stocks to Watch: AstraZeneca shuffles board ahead of buying Alexion

AstraZeneca gets a new CFO and sees positive results from its cancer drug, Smurfit Kappa cements its leading position in Latin America, Mondi refinances its debt to link to its sustainability goals, Petropavlovsk’s partner faces regulatory problems, and Baltic Classifieds Group plots a London IPO.

UK

Top News: AstraZeneca appoints new CFO from Alexion

AstraZeneca has announced that Aradhana Sarin, the current chief financial officer of Alexion Pharmaceuticals, will take up the same role at the London-listed company when the two companies merge together. 

AstraZeneca struck a deal late last year to purchase Alexion in a $39 billion cash-and-share deal and is hoping to complete it sometime in the third quarter of 2021. The appointment is conditional upon the acquisition closing and Sarin will take up her role on the day it is completed or on August 1 – whichever is later.

Sarin will be relocating from the US to the UK and will report directly to AstraZeneca’s chief executive Pascal Soriot. Sarin previously worked as chief business and strategy officer at Alexion before becoming CFO and has previously worked for Citigroup. She also spent two years training as a medical doctor in India and Africa before she moved into banking.

AstraZeneca’s current CFO Marc Dunoyer will step down from the board after seven years in the role but he will stay with the business by taking up new roles as the chief executive of Alexion and chief strategy officer of AstraZeneca.

The acquisition of Alexion is significant for AstraZeneca as it is expected to drive double-digit revenue growth through to 2025, improve margins, help fuel a reduction in debt, increase the dividend and immediately boost earnings in its first year upon completion.

In a separate statement, AstraZeneca said its Lynparza drug reduced the risk of cancer recurring by 42% in the latest Phase III trial involving patients with germline BRCA-mutated high-risk early breast cancer. It said the results ‘demonstrated a statistically significant and clinically meaningful improvement in invasive disease-free survival’ compared to the placebo.

Around 2.3 million people were diagnosed with breast cancer in 2020 alone and BRCA mutations are found in around 5% of cases.

‘While there have been great strides in the early treatment of breast cancer, the fear of cancer returning is still at the forefront of patients' minds. New targeted treatment approaches are needed in the adjuvant setting that can help keep cancer and that fear at bay,’ said Sue Friedman, one of the members of the trial’s steering committee.

Where next for the AstraZeneca share price?

The AstraZeneca share price trades above its multi month ascending trendline, which dates back to the year-to-date low in early March. It trades above its 50 and 100 day ma showing an established uptrend. The RSI is supportive of further upside, pointing higher and above 50. 

After hitting resistance around 8200p the share price has since eased lower, capped on the downside by 7865p.  

Buyers will be looking to retake 8200p before 8350p the late November high comes into focus.  

On the downside, a move below 7865p could negate the near-term uptrend and spark a deeper sell off towards 7600p the ascending trend line support and 50 sma. 

Smurfit Kappa enters Peru to cement market-leading position

Smurfit Kappa has purchased a leading paper-based packaging firm in Peru named Cartones del Pacifico to solidify its market-leading position in Latin America.

The price tag of the deal was not disclosed but it means Smurfit Kappa is now present in 13 Latin American countries and retains its position as the largest pan-regional supplier. The 368 staff of Cartones del Pacifico will join Smurfit Kappa’s 46,000-strong global workforce.

‘The acquisition of Cartones del Pacifico further expands our strategic reach and underscores our growing regional capability in Latin America. With a population of over 30 million, we are delighted to expand our footprint into Peru to help drive future growth,’ said chief executive Tony Smurfit.

Smurfit Kappa said the deal will open up opportunities to improve Cartones del Pacifico by utilising its scale and experience, particularly in fast-growing markets serving agricultural and industrial sectors.

Notably, Smurfit Kappa has sold-off its flexible packaging business in El Salvador as part of the deal.

Smurfit Kappa shares were trading 0.3% lower in early trade this morning at 3757.0p.

Mondi refinances debt to extend maturity and link sustainability targets

Mondi has refinanced its EUR750 million revolving credit facility and linked its new debt to its sustainability goals.

The paper and packaging firm has secured a new five-year facility to replace an existing one for the same value that was due to expire in July 2022. This means Mondi has extended the maturity and, notably, it has the option to extend the new facility by one or two further years.

The facility is directly-linked with Mondi’s 2030 sustainability plan, which is ‘designed to tackle global issues across the value chain with commitments focused on three action areas: circular-driven packaging and paper solutions, created by empowered people, taking action on climate.’

This will work by the lenders adjusting the margin on the facility depending on how Mondi performs against specific sustainability goals, although these were not outlined this morning.

The new facility is being provided by 10 different banks: Barclays, BBVA, Bank of America, BNP Paribas, Commerzbank, Deutsche Bank, Erste Group, Raiffeisen Bank International, SEB and UniCredit.

‘We are pleased to align our financing to our sustainability framework. Sustainability is at the centre of our purpose, culture and strategy to drive value accretive growth for the benefit of all our stakeholders. The group’s financial position remains strong. The revolving credit facility will extend our debt maturity profile and reinforces the strong relationships we have with our banking partners,’ said chief financial officer Mike Powell.

Kingfisher, the London-listed owner of B&Q and Screwfix, announced earlier this week that it had also linked a new £550 million revolving credit facility to its sustainability targets.

Mondi shares were trading 0.2% lower in early trade this morning at 1911.0p.

Petropavlovsk warns officials in Russia are looking into K&S approvals

Russian gold producer Petropavlovsk has warned that officials in Russia have initiated legal proceedings against one of its partners after accusing it of operating a mining project without the necessary approvals.

The Russian Federal Service for Environmental, Technological and Nuclear Supervision has started an administrative offence proceeding against IRC, which Petropavlovsk owns a 31.1% stake. The allegations relate to IRC’s K&S subsidiary that operates the Kimkano-Sutarsky mining and beneficiation plant project. Notably, Petropavlovsk is also a guarantor for K&S for two loan facilities provided by Gazprombank which, combined, had $204 million outstanding at the end of 2020.

‘IRC announced that the Russian Federal Service for Environmental, Technological, and Nuclear Supervision has initiated an administrative offence proceeding against K&S in the Obluchensky District Court of the Jewish Autonomous Region, in Russia, for operating the K&S project without the requisite approvals,’ Petropavlovsk said.

Petropavlovsk said K&S could face a fine or be ordered to temporarily shutdown depending on how this pans out.

‘The company understands that no court date has been set and that K&S will continue to operate as usual. The potential outcome of the administrative offence proceeding is unclear,’ Petropavlovsk warned.

Petropavlovsk shares were trading 0.4% lower in early trade this morning at 25.38p.

Baltic Classifieds Group plots London IPO

Baltic Classifieds Group has unveiled plans to potentially list on the main market of the London Stock Exchange this year in a listing that is expected to allow the company to be included in the FTSE.

Baltic Classifieds Group, also known as BCG, owns 12 online classifieds portals operating in Lithuania, Estonia and Latvia. These cover areas including automotive, real estate, jobs and services while four of the sites are classed as ‘generalist portals’ that offer a wide range of products. It owns the number one portal in each area and said its audience numbers are two-to-three times higher than its biggest competitor.

‘These leadership positions are highly sustainable due to the strong network effects generated by having the largest and most engaged user base, very high levels of customer penetration and the highest number of listings, and very strong brand awareness, with most of the group's portals ranked among the most visited websites in their respective country,’ BCG said.

The portals attract 69.2 million visits on average each month and data shows that the average citizen in the Baltics uses the portals 11.5 times per month, demonstrating the popularity of the sites.

BCG makes money in several ways. Firstly, it secures subscription income from businesses that want to list on its portals. Secondly, it makes money from consumers that want to list products or services through one-off transactions. Lastly, it makes ancillary revenue from providing the likes of financial and data services.

BCG reported annual revenue of EUR42.3 million and adjusted Ebitda of EUR33.0 million in the financial year to the end of April 2021. It said it has ‘a track record of consistent, industry-leading adjusted Ebitda margin and cash conversion’.

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