Ishii Iron Works remakes self for workers, new energy

Looking to take a longer-term perspective for its employees, Ishii Iron Works Co. Ltd. decided to delist its shares last year, the second year of the current president’s term and a year before its 125th anniversary.

“Over time, the organization had become less flexible, a common trajectory for companies with a long history,” President Hiroaki Ishii said in a recent interview, part of a monthly series conducted by Naonori Kimura, a partner for the consulting firm Industrial Growth Platform Inc.

“The first thing I thought I should do was motivate and energize the workers,” Ishii said. Toward that goal, he took steps to review the company’s organizational culture and human resource management, as well as create strategies to help it carry out its business.

In the past, the company had released medium-term management plans for the benefit of shareholders. “But what was more important for this company was to think about our purpose, vision and value. So we started out envisioning what kind of company we wanted it to become and the reason why it exists,” Ishii said. After the delisting, the president started to explain the new strategies to employees, and the company crafted a new management plan based on them last year.

The company began in 1900 when Ishii’s great-grandfather Takichi Ishii opened an ironworks in Tokyo’s Tsukishima district, part of a man-made island in Tokyo Bay that the Meiji government intended to develop as an industrial zone along with the neighboring Tsukudajima and Ishikawajima districts.

The company experienced significant growth as the global demand for iron increased, driven partly by the construction of bridges and industrial structures like chimneys as Japan developed. It was also an era when energy sources like oil and gas began to replace coal as the primary fuels for heavy industry.

“The transition led us to our company today, which builds tanks to store energy and plants to produce it,” he said. The ironworks started to assemble plants for gas producers by using imported iron parts but later was able to source them domestically.

Ishii said the key to the company’s growth was the trust the founder gained from customers with his devotion to the work plus use of technology to weld iron parts instead of using rivets. Later, the founder left an anecdote about completing a commissioned iron work a day before leaving to take part in the Russo-Japanese War (1904-1905). His personality and the business network he created helped bring in more orders when the ironworks started to build domestic plants, supported by a gas company.

The company then expanded on the back of strong demand for storage tanks as major oil firms built energy complexes, including refineries and reserve storage for growing energy demand, Ishii said.

Domestic energy demand has declined in recent years along with the country’s shrinking population, weakening demand for energy-related facilities. However, former Prime Minister Yoshihide Suga’s pledge in 2020 that the country will go carbon neutral by 2050 created the potential for future business for the company in renewable energy as well as new energy sources such as ammonia, which does not emit carbon dioxide, methane generated from CO2 and hydrogen, and sustainable aviation fuel. “The market has been shrinking, but is now seeing new opportunities,” he said.

According to the latest data from before Ishii Iron Works delisted its shares in 2024, the company posted ¥1.48 billion ($10.5 million) in operating profit and ¥1.20 billion in net profit on sales of ¥9.97 billion for the business year that ended in March 2024. The company carried out the delisting through a management buyout. But the delisting was not itself the company’s goal, Ishii said; rather, it was a step toward what he hoped to achieve. “For one thing, I envision management with a long-term standpoint,” he said. “For another, I was determined to make the company employee-centered.”

He said the company used to be run solely for shareholders, which involved things like shareholder meetings, announcements of midterm business plans and engagement meetings with shareholders. The time, cost and effort required were enormous for the medium-scale company, he said.

“The delisting made me realize that I had not communicated with the workers the same way as I did with the shareholders,” he said. “I had not explained to them about what to invest in to make our business sustainable, how to grow, how to make profits and how to allocate them.” That is why he told them that the company would now focus on employees rather than investors and disclose information to them in the way it once did for investors, he said.

For the future, while still constructing energy plants, the company plans to also work on carbon neutral-related businesses by improving technologies, developing human resources and cultivating vendors.

Among those technologies, there is potential for enhancing efficiency and automation by utilizing drones for inspection and artificial intelligence for plant construction. The company is also looking to apply its welding skills for wider industries, including nuclear energy and space-related businesses. In the future, Ishii said, he is interested in developing technological platforms by using AI and augmented reality, which integrates real-world information with digital overlays, in things like plant construction or human resource development.

There are hurdles to overcome. These include how to adapt to the transition to a carbon neutral-centric society, how to manage aging plants and how to construct plants resilient to natural disasters.

Ishii also said they need new welding technology and new metal materials to build large-scale ammonia tanks, with ammonia increasingly in focus as one of the next-generation fuels helping to reduce carbon emissions. He also said that how to secure enough labor is an issue connected to overcoming all these hurdles.