Hazama Ando - Company History

The legal entity and the listing that trade today as Hazama Ando descend from Hazama-gumi, founded in 1889. That April, Japan’s Accounting Act put government works out to open competitive tender as a rule — which meant that engineering judgement and the accuracy of an estimate, rather than connections alone, could win work. Hazama Takema, an engineer who had left Nippon Railway, set up as a sole proprietor in Moji, Fukuoka, and took railway construction as his opening.

Civil engineering is a business in which a single job runs to enormous scale and profitability turns on reading the geology and choosing the method. The ability to finish a difficult work therefore is the credit, and it brings the next difficult work. Hazama-gumi moved its head office from Moji to Shimonoseki and then to Tokyo, widening into a national contractor with the backing of Imperial University engineers such as Sengoku Mitsugu. It completed the Yalu River bridge in 1911 using Japan’s first caisson work, entered hydroelectric civil engineering in 1912, and added subway work in 1931.

The firm incorporated as it grew — a limited partnership in 1917, a joint-stock company in December 1930 with ¥500,000 of capital, unified the following April — and raised capital to ¥6 million by 1944. The prewar showpieces were the Suiho power station in Korea, at 700,000 kW the largest in Asia, and in 1943 the Shimonoseki section of the Kanmon tunnel, Japan’s first undersea tunnel.

Rebuilding a company shattered by the war fell to Kambe Mannosuke, later called its second founder, who served as president for twenty-four of the firm’s first eighty-three years. He restarted with a commission at Meiji Shrine and a run of Occupation works, then in 1951 took Japan’s first postwar dam, Maruyama on the Kiso River. Matsunaga Yasuzaemon called him the country’s dam king; he was also its second-largest shareholder.

The defining job was Sakuma dam, begun in 1953. Hazama bid it as a joint venture with Kumagai Gumi and the American contractor Guy F. Atkinson, winning the powerhouse and barrage together for roughly $23.6M (¥9bn), and organized the site around imported machinery — wagon drills, batching plants, cable cranes, dump trucks. Work that conventional methods would have taken more than ten years to complete was finished in three, producing what was then Japan’s largest gravity dam. The system assembled at Sakuma carried into the works that followed: Kurobe No.4, begun in 1956 and the world’s second-largest arch dam; Miboro, a rockfill dam completed in forty-four months with Atkinson technology again; and Ikawa, Japan’s first hollow gravity dam, in 1957.

Hazama listed on the Tokyo Stock Exchange second section in December 1962, ranked third in the industry in civil engineering and tenth in construction overall. In the year to September 1962, civil works were 62.4% of completed value — dams alone 48.3% — and customers were 60.3% electric utilities and 25.6% government. The mix then shifted: by the year to September 1966 building work exceeded civil for the first time at 53%. Overseas work followed in Vietnam, Thailand and Laos, listings on the first sections of the Tokyo, Osaka and Nagoya exchanges came in 1974, and in 1985 the company was part of the breakthrough of the Yoshioka section of the Seikan tunnel.

Renamed Hazama in 1992, the company was already failing to collect on what it had built during the bubble. Interim ordinary profit for the half to September 1992 fell 41% to ¥8.6bn, overdue receivables reached ¥40bn, and the largest single exposure — some ¥40bn of construction payments tied to the Autopolis circuit in Oita — went bad when the operator was declared bankrupt in September 1992. Guarantees, mostly to affiliates, stood at close to ¥200bn. Chairman Honda Shigeru admitted the underwriting failure plainly: if a bank had decided to finance a project, the company had been inclined to assume it was safe.

In May 2000 Hazama asked its four main lenders to forgive $974.6M (¥105bn) of debt, planning to book roughly ¥120bn of extraordinary losses. The rehabilitation plan targeted ¥360bn of parent sales and cut 700 staff — but the press conference conveyed little urgency, and the management responsibility normally inseparable from a request for debt forgiveness was left undefined. It did not hold. In January 2003, still carrying nearly ¥200bn of interest-bearing debt, the company disclosed a ¥123.2bn consolidated net loss and went back to all forty-six of its lenders for a second rescue; President Yamato Fumiya offered to resign for having asked twice.

The remedy this time was structural. On 1 October 2003 the construction business was carved out at book value into a successor company, Hazama Corporation, which listed on the TSE first section and carried the historic name forward, while the properties with unrealized losses stayed behind in the old entity to be sold down. The successor was lighter but not stronger on its own: consolidated sales rose to ¥237.2bn by the year to March 2007, then ordinary profit shrank to ¥0.5bn in the year to March 2010, and the last year before the merger closed at ¥197.9bn of sales — short of the ¥200bn and ¥7bn of ordinary profit the rehabilitation plan had promised at its conclusion.

Domestic construction investment had halved from around ¥80tn in the mid-1990s to ¥41tn by 2010, and the gap between the majors and everyone below them widened as it fell. On 24 May 2012 Hazama and Ando Corporation announced a merger effective 1 April 2013: Hazama, strong in civil engineering, as the surviving company, Ando, strong in building, as the dissolving one, at 0.53 Hazama shares per Ando share. The result kept Hazama’s securities code and listing and took both names — Hazama Ando Corporation. FY2013 sales of ¥371.2bn were 87.6% above the ¥197.9bn Hazama had managed alone, placing the company seventh among listed contractors. Nomura Toshiaki of Ando became president; Hazama’s Ono Toshio became chairman.

The complementarity worked on the top line and only slowly on the bottom. Eliminating duplicated head-office functions and cross-selling between the two disciplines lifted FY2016 to ¥407.9bn of sales and ¥37.0bn of operating profit, but the margin split was stark — 20.1% in civil against 5.5% in building. Fukutomi Masato, president from 2018, made building-margin repair the first priority and got it from 4.4% to 7.5% by FY2021 while holding operating profit in the ¥26bn range through the pandemic. The balance sheet mended faster still: equity ratio doubled from 23.7% in FY2014 to 47.7% in FY2021, and interest-bearing debt fell from ¥32.5bn to ¥24.3bn.

By FY2022 the binding constraint was no longer a shortage of work but the profitability of work already on the books, as material and labour costs surged and operating profit fell 25% to ¥19.9bn. Kuniya Kazuhiko, who joined the old Hazama in 1988 and became the third post-merger president in April 2023, answered with a Medium-Term Plan to 2025 built on business strength, ESG and — its distinctive plank — human capital. His stated ambition, to be the company in the construction industry that treats its employees best, is a direct reading of an industry losing young entrants to an ageing site workforce: securing and retaining people is treated as the precondition for continuing to operate at all. Average compensation rose from ¥8.48m in FY2018 to ¥10.05m in FY2024, and FY2024 recovered to ¥425.1bn of sales and ¥35.2bn of operating profit as the building margin reached double digits — 10.3% — for the first time since the merger.