Constructions for a Better Future With Hamada

It’s been about 50 years since Japan’s construction boom occurred, and we’re now sitting at a time when many infrastructure projects are aging and in need of maintenance. Under what has been termed a scrap-and-build policy, new builds in cities such as Tokyo and Osaka continue to grow. However, this is expected to level off by 2040, when the full extent of Japan’s declining population will be realized. What is your assessment of Japan’s current construction market and its needs for the years to come?

For the domestic market, the population will shrink, so new construction will be decreasing. However, in terms of maintenance, I believe that will increase for buildings, roads, and bridges because they will get old. For example, when we look at waste treatment facilities, new ones are no longer being built, but we have been providing life-extending construction.

To touch upon the demographic issue you mentioned, the Japanese population is currently 125 million, and we expect that to be 100 million by 2050 and perhaps 80 million by the end of the century. This presents two problems for Japanese companies. One is obviously the shrinking domestic market. The other is a labor shortage. There is expected to be an eleven million worker deficit by 2040. We’re seeing different strategies for dealing with this. For example, we’re seeing companies turn to AI automation and look for more human resources. Others are looking for mergers, acquisitions, and partnerships. A common word we’re hearing is internationalization. What are the challenges this creates for your company, how are you navigating those challenges, and how much of your solution is about internationalizing?

In terms of the labor shortage, we have been using a headhunting company to source new workers and to negotiate individually to welcome them as employees. This year, we have also started doing recruitment promotion wrapping on the bus that is running inside the city.

Another strategy is M&A. We have been acquiring companies with plants so we can gain more people. Five years ago, we acquired Sanshin industries in Ibaraki, and this year, we acquired the Kyoei Plant in Chiba. Right now, we are negotiating with four companies regarding M&A, all with the goal of acquiring employees. We also recruit and welcome workers from Vietnam as well as those who are from Vietnam and are already living in Japan.

We have seen the Japanese yen experience some major fluctuations against foreign currencies, especially the US dollar, and it has reached record lows this year. This creates questions and factors that lead to concerns about whether Japan can be a more or less attractive destination for foreign workers. How do you react to these concerns, and what strategies are you planning to use to make your company and Japan a more attractive place for foreign workers?

I think it all comes down to the salary. If we make a good offer and contract, I think they will come to Japan regardless of the exchange fluctuation.

You mentioned your mergers and acquisitions. Are you expecting to use that strategy on the international stage, and if so, what does an international partner of choice look like to Hamada?

If we are to have any partnerships overseas, it will be in Vietnam because we have a lot of Vietnamese workers, so if we can collaborate with a chemical plant in Vietnam, it will be easy to communicate. But this is just a rough idea for now.

In terms of construction engineering, the engineers are considered workers outside Japan, so that we can send Japanese supervisors, but because of working visa issues, we cannot send workers outside of Japan. That’s a bottleneck for us. Foreign workers also cannot come to Japan for the same reason. The only way we can probably deal with this issue is to use a local company for the construction, but there is a high hurdle to doing that.

We’ve spoken about the shrinking market related to the population decline. How is your company navigating this, not in terms of employees but in terms of business opportunities?

There are fewer opportunities in cities where maintenance would be enough for the existing facilities, but for regional cities or towns, the reduction in the population is so fast, so severe, that there needs to be a new system rebuilt because it doesn’t make sense to maintain the current long water pipes or electric lines to support the small population. The reconstruction of a smaller system using groundwater or river water would be required so that it will apply to smaller towns. That can be said for electricity as well. A big power plant with very long electric lines will be a waste. Instead, we could use solar power generation or a power generation that will be suitable for a smaller capacity. Similar to the technology from the past, maybe there will be an opportunity to use water purification technology for water from the rivers, for example, so that the facility can be built by our company and that would be sufficient for the regional demands.

I have a very localized mindset, so I don’t think the people in the local regions are into the convenience lifestyle like people in the cities. It’s just my personal belief, but I think that not as many medical care services are needed or demanded in the local area. We’re not hoping to live a very long life or enjoy fancy food, for example, and the inconvenience is fine for us, so I think bringing everyone to the city would be a drastic or extreme idea. Therefore, I think local maintenance is important.

You mentioned that your company is looking to hire foreign workers. What would you say is the benefit of working at Hamada, and what type of solution can you provide to a foreign worker who comes to Japan to work for your company?

The greatest benefit we can offer is that they can learn the technology, including creating the machinery and equipment, welding, assembly, and piping.

Sustainability is a core priority for your group, which is exemplified by your Astec subsidiary and your environmental initiatives through the innovative development of water purification and recycling technologies. Can you explain to us what Astec is doing in terms of sustainability and what initiatives you are implementing to minimize your environmental impact?

Sewage purification has been Astec’s project in the past, but right now, they are trying to use collected food waste to create methane gas and then generate electricity from it. We are aiming to put this into practice within two years. This work is currently happening in Toyooka city in Hyogo prefecture.

Looking at your company, you have a plant division, a development division, and an environmental business, each encompassing specialized departments. You also have a water facilities division and an electrical instrument division. Which of these divisions do you believe has the greatest potential for market growth?

I think environmental work has the biggest growth potential. That’s Astec’s main business, and we are investing in it to support their initiatives by collecting cash we earn from other businesses. I think that’s the area of growth.

How much are you investing?

Including our bank loans, we are investing JPY 4 billion in the biogas power generation business.

Do you see yourself expanding into other segments?

For the plant industry, I don’t think there will be a great increase in demand for the petroleum chemistry area in Japan, so we would like to gain more market share. Although we are reducing the number of engineers because of the declining population, our competitors are struggling as well, so we would like to win in the market when everyone is getting weak.

Another area of possible growth is our Nagaoka company, which creates screens within the plant reactor. It’s something like a basket that is used for the water purification of the groundwater, so I think that’s an area of growth.

Is it a water intake system?

Yes, it screens the groundwater and uses a technology with no chemicals to purify the water to make it potable. This is a less expensive initiative for a small town, and I think it’s a good product, but it all comes down to government policy. The growth potential is with our subsidiaries, and the main group will raise cash.

You mentioned the struggles you and your competitors faced in the plant industry. Your plant division comprises four key departments for construction, manufacturing, design, and onsite work. What synergies are you able to generate between these departments, and what makes your plant division the preferred option for the industry?

We have a design team that is embedded with the customers, so we design the plant and machinery, we build the chemistry and other equipment, and then installation can be done. We can also create piping and machinery inside the factory at the customer’s site. We have people who can meet the special needs of our customers, and we have very close relationships with them, so we work closely together to build the plant. We can also provide maintenance and delivery service, as well as warehouse management of the products created at the customer plant. From design to shipment, we have various sales points, and we are very convenient for customers, which I think really matters.

Your clientele spans different sectors, including energy, chemicals, water treatment, and logistics. You also have government partnerships and major business industry leader customers. What future projects and partnerships are on the horizon for Hamada?

We have already acquired some of our former partner companies like Nagaoka, Astec, and others, so we are exchanging human resources among our group of companies. For example, our biggest customers are Daicel and Nippon Shokubai, which are located fairly close by. Some of our acquired former partners had big customers, like Mitsui-Kagaku with the Kyoei Plant, and we have gained many other customers through M&A. However, a lot of our affiliates are struggling with a reduced workforce even though they have business opportunities, so we are exchanging workers to make full use of our resources as a group and to cooperate with each other.

Your notable achievements include the seismic reinforcement water purification reservoir in Osaka Kashiwara City. You also enhanced the prefectural water supply receiving facility in Itami City. How do you successfully integrate construction and civil engineering to improve infrastructure?

One reason we win a lot of the water purification facility construction work is because they are mainly government tenders. However, in order to take part in the tender, companies are screened for points regarding their experience in plant machinery and construction. Usually, those companies with machine construction experience are large listed companies. Compared to those big companies, our companies have reduced costs, so we have an advantage in getting water purification facility construction work.

You entered China in 2012 and Vietnam in 2020. Beyond those activities, which countries have Hamada identified as being in need of future growth?

Nippon Shokubai has plants in Indonesia and Belgium and their chemical plant is unique and specialized in a way nothing like any other company, so we have a niche knowhow about this area, and our customer is requesting us to go to those countries. We have sent supervisors several times in the past, and there may be a possibility of purchasing some companies in those countries to oversee those plants.

Your company is celebrating its 118th anniversary. Let’s imagine that we will come back in two years for your 120th anniversary to interview you again. What dreams and goals would you like to achieve over those next two years, and how would you like your company to be seen in the eyes of the global market?

I want the name Hamada to be known around the world.

For more information, please visit their website at: https://www.hamada-inc.co.jp/english/