Umicore has positioned itself to take advantage of rising demand for electric vehicles, investing 460 million euros ($540 million) to expand by over six times its production of nickel manganese cobalt (NMC) cathode materials, which are sought after components of lithium-ion rechargeable car batteries.

Umicore also said that it expects full year recurring operating income to be at the high end of its previously guided range of 370 million euros to 400 million euros.

Shares in Umicore rose 1.8 percent to near record-high levels, boosting gains to 25 percent so far this year.

Interest in electric vehicles is growing after Britain and France committed to ending the sale of petrol and diesel cars from 2040 while leaders of a number of cities want to ban diesel vehicles.

"The fact that you can capture scale effects is important first of all to be competitive and second of all to move the overall price and cost of the battery down which is what as an industry we need to do to make sure that the acceleration continues after 2020," Umicore Chief Financial Officer Filip Platteeuw told Reuters.

Platteeuw added that the first additional production lines will be commissioned by the end of the year.

The rising demand for battery materials helped to boost Umicore's recurring operating income by 16 percent to 203.6 million euros during the January-June period. Analysts polled for Reuters had on average expected the company to report recurring operating income of 188 million euros.

Its Energy & Surface Technologies business, which includes its NMC cathode activities, saw recurring operating profit rise 65.9 percent to 61.2 million euros for the first half.

"They are going to go through a period, thanks to first-mover advantage, of over-earning in batteries, in my view," said Berenberg analyst Sebastian Bray.

"It goes to show that they can make the batteries business work from a margins perspective." Berenberg has a "Buy" rating on the stock.

The company said it would pay an interim dividend of 0.65 euro per share in August.

(Reporting by Alan Charlish; Editing by Thyagaraju Adinarayan/Keith Weir)

By Alan Charlish