Mitsui E&S - Company History

The founding of the shipbuilding department and the yard at Tamano

Mitsui Engineering & Shipbuilding began when the shipping department of Mitsui & Co. sought a yard of its own for building and repair. Kawamura (川村), the head of the shipping department, had urged from 1916 that the trading house take up shipbuilding alongside its other lines, and in October 1917 he submitted a formal petition to the president[1]. The site chosen faced Uno Bay, in the Tama and Wada districts of Hibi-cho, Kojima-gun, Okayama Prefecture: 186,000 tsubo in all — salt pans, fields, woodland and housing plots — acquired through repeated negotiations with 145 separate landowners[2]. Locally a promotion league was formed to rally opinion behind attracting the works, compensation was paid to the fishing co-operatives of Tama, Uno and elsewhere, and the fisheries settlement was concluded in July 1917[3].

With the land secured, the board resolved on 2 November 1917 to establish a shipbuilding department, and at an extraordinary general meeting on the 14th of the same month shipbuilding was added to the business purposes in the articles of association, formally bringing the department into being. The registered location of the works was Uno village, Kojima-gun, Okayama Prefecture, and Mitsui Engineering & Shipbuilding still keeps 14 November as its founding anniversary[4]. Construction began in 1917 on a temporary works at Uno and on the Tama works, and as early as December that year the first vessel — the wooden ship Kaisho Maru — was launched at the temporary Uno works; the first steel ship, the Santen Maru, followed in March 1918, and in October 1918, while the Tama works was still under construction, the keel of its first ship, the Sanjin Maru, was laid[5]. In May 1919 the Tama works — today's Tamano Works — began operating[6] and grew into a shipbuilding base on the Inland Sea coast. Behind Mitsui & Co.'s wish for a yard of its own lay the wartime demand for ships during the First World War.

The earthquake windfall, the turn to diesel, and incorporation before the war

The Great Kanto Earthquake of 1923 ironically secured the department's survival. The yards of the Kanto region were destroyed and repair work poured into the Kansai, while the movement of relief and reconstruction supplies sent demand for tonnage sharply higher; the department took orders to repair 28 imported second-hand ships and to build 114 replacements for vessels lost in the fires[7]. Until then losses had been recorded period after period and the case for abolishing the department was strong among the senior management of Mitsui & Co., but in the boom brought by the earthquake that argument simply faded away[8]. The shipping department dropped its policy of importing old ships and turned instead to building economical, high-quality vessels, settling on the Akagisan Maru (4,631 gross tons) and five others[9].

At the heart of those high-quality ships was the move to diesel. Okamoto Yasushi (岡本泰), head of the machinery design section, and Kawai Kikuhei (川合菊平) of the shipping department were sent to Europe to study propulsion[10], and the Akagisan Maru, laid down in 1923, was fitted with a diesel engine built by Burmeister & Wain (B&W, today Everllence SE) of Denmark. She was Japan's first ocean-going diesel ship[11], and her fine performance at sea created a national appetite for building large diesel vessels. In August 1926 the company signed a manufacturing and sales licence agreement with B&W for diesel engines[12], and that agreement became the technical foundation of the marine engine business ever after.

The corporate form settled before the war as well. In July 1937 the business was separated from Mitsui & Co. and incorporated as Tamano Shipyard Co., Ltd., becoming an independent shipbuilding company twenty years after operations had begun[13]. A naval vessels section — later a division — was set up in 1937, and in 1938 a chemical machinery section followed in connection with the synthetic petroleum business, extending the company into munitions and land-based plant; in March 1940 it was designated a Navy-controlled works[14]. On 6 January 1942 the name was changed to Mitsui Engineering & Shipbuilding Co., Ltd., and in June that year capital was raised to ¥30 million[15], putting the company on a wartime footing to turn out standard wartime ships and submarines in volume. After the defeat, five works at home and in the former overseas territories were closed and everything was concentrated on the Tamano yard alone, and the planned shipbuilding programme that began in 1947 gave the company its opening to rebuild. In the same year it took an order, alongside Harima Shipyard, for a 400-gross-ton whale catcher from Norway — the first steel export ship built in post-war Japan[16]. In May 1949 the shares were listed on the Tokyo and Osaka stock exchanges[17], so that incorporation, a settled company name and a public listing were all completed one after another in the passage from pre-war to post-war.

From single-yard concentration at Tamano to the move into Chiba

For some time after the war Mitsui Engineering & Shipbuilding secured stability and growth by running the Tamano yard as its only works[18]. In an age moving from chaos to recovery, one company with one works had the strengths of concentrated management. But Tamano lay west of the Hanshin area and could capture only so much repair work, so providing a service dock in a suitable location had been a standing question since before the war[19]. High growth and the expansion of seaborne trade pushed ships towards specialisation and greater size, and amid what was called the shipbuilding boom the limits of Tamano's scale alone — in capacity to grow and to compete — began to show.

The company looked for a new works near the economic zone of the capital and surveyed Tokyo Bay from about 1956. Kawasaki and Omori could not provide the area required, Honmoku had problems of ground conditions and wind direction, and both were passed over. At that time Chiba Prefecture was pressing ahead with a plan to reclaim public waters in the Goi and Ichihara districts to create factory land, and Edo Hideo (江戸英雄), president of Mitsui Fudosan — which had made land creation by reclamation a new line of business — also recommended the Ichihara district[20]. In March 1957 Mitsui Engineering & Shipbuilding applied for an allocation of 1.65 million square metres (500,000 tsubo) in the Keiyo industrial belt of Chiba Prefecture[21].

The Chiba works began operating in May 1962[22], built around a dock for ships of 57,000 gross tons, and the docks were enlarged as the “100,000-ton era” approached. In March 1965 the Chiba works was renamed the Chiba Shipyard, standing alongside the Tamano yard as one of two principal sites[23]. A 150,000-deadweight-ton dock was completed in October that year and a 500,000-deadweight-ton dock in June 1968, giving the company the capacity to build VLCCs (very large crude carriers)[24]. Having a base for large-ship construction in the capital region, on top of Tamano on the Inland Sea, mattered a great deal.

The Fujinagata merger and diversification in earnest

In October 1967 Mitsui Engineering & Shipbuilding merged with Fujinagata Shipyards Co., Ltd. Founded in 1689, Fujinagata was a distinguished house known before the war as “Fujinagata of the destroyers”[25], and at the time of the merger it had capital of $5.4M (¥2bn) and about 2,000 employees. At an exchange ratio of four Mitsui shares for every five Fujinagata shares[26], the company took over the head works at the mouth of the Kizu river in Osaka and the Funamachi works. Absorbing the process machinery and steel structure technology of a firm that thereby closed some 280 years of independent existence, Mitsui Engineering & Shipbuilding had, by the end of the 1960s, put in place its basic structure as a heavy shipbuilder centred on merchant ships and tankers. It went on widening its network of sites — the Yura works in April 1973, the offshore structures dock at the Tamano yard in February 1975, and the Oita works in October 1981[27].

From the late 1970s into the 1980s the company extended the technology and field experience built up in shipbuilding into adjacent fields. In June 1978 it opened the Akishima Laboratory (made a subsidiary in 1986 as Mitsui Engineering & Shipbuilding Akishima Laboratories), giving it a research base for fluid and structural analysis[28]. In October 1985 it founded Sanzo Environmental Service and moved into environmental engineering, and in June 1987 it set up Mitsui Zosen Plant Engineering as the nucleus of its plant engineering business[29]. Ranging research, environmental and plant businesses around shipbuilding, it laid the ground for a single shipbuilder to become a diversified group.

Diversification at the edges as the merchant ship market worsened

In 1988 Mitsui Engineering & Shipbuilding took two diversification steps. In October it established PACECO CORP. in the United States jointly with Mitsui & Co. and entered the container crane business, and in December it took a management stake in Modec Inc. (renamed Mitsui Ocean Development in 2003), joining the offshore FPSO (floating production, storage and offloading) business. Both would later grow into businesses that carried consolidated profit as merchant shipbuilding declined. It acquired Burmeister & Wain Scandinavian Contractor A/S in December 1989 and Babcock Energy Limited of the United Kingdom in September 1995 (as Mitsui Babcock Energy), extending plant and boiler operations into Europe as well.

From the 1990s, however, the strong yen and the rise of Chinese and Korean yards made competition in merchant ships severe. Consolidated revenue rose from $3.7B (¥457bn) in the year ended March 2002 to $8.7B (¥766bn) in the year ended March 2010, and in that same year the company recorded peak recurring profit of $478.5M (¥42bn) and net profit attributable to owners of the parent of $224.5M (¥20bn). Behind those figures, though, the merchant ship segment found it structurally harder and harder to hold its break-even point. The shipping slump that followed the Lehman shock, and the fall in orders for container ships and bulk carriers, pushed the economics of merchant shipbuilding down continuously.

Renewed M&A and the construction losses on Indonesian coal-fired power

In the 2010s the company widened its territory again through M&A. It made Showa Aircraft Industry a consolidated subsidiary through a tender offer in March 2014, and took in TGE Marine AG of Germany in October 2015 and Kaji Technology in March 2017, reaching out around the machinery and systems business. But merchant shipbuilding, the core business, had fallen into chronic loss by the middle of the decade, and consolidated operating profit went from $74M (¥8bn) in the year ended March 2017 to an operating loss of $47.1M (¥5bn) and a net loss attributable to owners of the parent of $91.5M (¥10bn) in the year ended March 2018 — the first full-year loss on a consolidated basis. The gap widened between the territory it had added and the core business that was sinking.

In April 2018, to separate unprofitable merchant shipbuilding from the parent and make each operating company answerable for its own results, the group moved to a holding company structure and changed its name to Mitsui E&S Holdings. Immediately afterwards, however, provisions for construction losses surfaced on overseas plant and EPC contracts — above all on the projects including the PT Tanjung Jati B coal-fired power station in Indonesia. The engineering segment posted an operating loss of $731.1M (¥80bn) in the year ended March 2019, and on a consolidated basis the group recorded an operating loss of $547.7M (¥60bn) and a net loss attributable to owners of the parent of $638.5M (¥70bn) — the largest deficit since its founding. Losses continued in the year ended March 2020, with a consolidated operating loss of $581.6M (¥62bn) and a net loss of $807.3M (¥86bn), and consolidated net assets were eroded from $2.2B (¥239bn) at March 2018 to $605M (¥65bn) at March 2020, about a quarter of the earlier figure. The bill for having spread itself too widely came due as a management crisis immediately after the move to a holding company.

Exiting loss-making businesses and unwinding the overseas plant work

The structural causes of the crisis were the chronic losses in the merchant ship segment and the construction losses on overseas plant contracts. To stop the erosion of capital at the parent, there was no course but to withdraw from loss-making businesses and unwind the overseas operations at the same time. Mitsui E&S sold all its shares in Engineers and Constructors International in December 2019, closing out the US EPC business, and in March 2020 sold its entire holding in Showa Aircraft Industry — an exit only six years after it had been made a consolidated subsidiary — while letting go of Mitsui E&S Plant Engineering at the same time. In October 2020 it transferred 70 per cent of the shares of Mitsui E&S Steel Structures Engineering, moving the steel structure business outside the group, and so narrowed at a stroke the territory it had widened through the M&A of the 2010s.

The withdrawal reached as far as the core business of shipbuilding. Under president Oka Ryoichi (岡良一) the company ended newbuilding at the Chiba works in March 2021, and in October 2021 it transferred 49 per cent of the shares of Mitsui E&S Shipbuilding to Tsuneishi Shipbuilding while at the same time transferring the naval vessels business to Mitsubishi Heavy Industries and ending newbuilding at the Tamano works as well. The ship division had been the core business for more than a hundred years since the founding in 1917, but amid the structural deterioration of the merchant ship market and competition from overseas yards it was judged that continuing under its own power was not possible. A further 17 per cent of Mitsui E&S Shipbuilding was transferred in October 2022, making it an equity-method affiliate, and under the succeeding president Takahashi Takeyuki (高橋岳之) a share transfer agreement was signed with Tsuneishi Shipbuilding in April 2025, moving towards complete withdrawal from shipbuilding. “Ships”, “Offshore development” and “Engineering” disappeared from the consolidated segments, which from the year ended March 2023 were reorganised into four: Marine Propulsion Systems, Logistics Systems, Growth Business Development and Related Services.

Rebirth as a high-margin group built on marine engines and logistics

The axis of the recovery was the marine engine business that runs back to the founding years, together with the logistics systems business — container cranes and port cargo-handling machinery — descended from PACECO. In April 2023 Mitsui E&S acquired the new company that had taken over the two-stroke marine diesel engine business of IHI Power Systems and renamed it Mitsui E&S DU, strengthening in the world market the marine engine base that had run on from the B&W technology tie-up of 1926. In the same month it absorbed Mitsui E&S Machinery and Mitsui E&S Business Service within the group and changed its name back to Mitsui E&S, dropping the “Holdings”. In June 2023 it moved from a company with a board of corporate auditors to a company with an audit and supervisory committee, reforming its governance.

The concentration on marine engines and logistics systems showed up in the financial figures. Consolidated revenue halved from $4.4B (¥579bn) in the year ended March 2022 to $1.9B (¥262bn) in the year ended March 2023, but this was mainly the deconsolidation that followed the shipbuilding segment becoming an equity-method affiliate, and the earning power of the core business in fact improved. Consolidated operating profit rose for three years running — $66.9M (¥9bn) for the year ended March 2023, $129.4M (¥20bn) for March 2024 and $154.4M (¥23bn) for March 2025 — and the operating margin climbed from 3.6 per cent to 6.5 per cent and then 7.3 per cent. Net profit attributable to owners of the parent for the year ended March 2025 was $261.3M (¥39bn), and consolidated net assets recovered about 2.6 times, from $605M (¥65bn) at March 2020 to $1.1B (¥170bn) at March 2025.

The hundred-odd years of Mitsui E&S trace an arc: a period in which merchant shipbuilding carried a group with revenue on the scale of ¥1 trillion, diversification into adjacent fields, structural depression, the fall into loss in the year ended March 2019, and concentration on core businesses. The American container cranes (PACECO) and the offshore FPSO business (Modec) it stepped into in the late 1980s grew into the businesses that carried consolidated profit as merchant shipbuilding declined. Conversely, most of the territory added through the M&A of the 2010s, including the purchase of Showa Aircraft in 2014, became the object of sale or withdrawal once the group fell into loss. Cutting away the ship division that had run since the founding in 1917 and concentrating on marine engines and logistics systems, the present shape of the business is a change of direction with few parallels in the history of Japanese heavy shipbuilding — one in which the core business was let go and the businesses at the edge were made the leading players.