UPDATE 2-Publicis new business to help weather Q2 slide

* Q1 underlying down 4.4 pct at 1.08 bln eur

* CEO sees Q2 "even worse" than Q1 for global ad market

* Expects to beat global ad market in Q2

* Eyes industry-best margins in '09; sees recovery in '10

* Stock up over 2 pct (Adds details)

By Dominique Vidalon

PARIS, April 29 (Reuters) - French advertising company Publicis (PUBP.PA) expects its new business pipeline to help it withstand a second-quarter slide in the global ad market, as it posted a 4.4 percent fall in first-quarter underlying sales.

The world's third-largest advertising group by revenue said there was a risk its operating margin would decline this year from last year's 16.7 percent but that it aimed to deliver industry-best margins as it remained focused on cost control.

"Our targets are clear: gain market shares, better control our costs to keep margins at a very high level," Chairman and Chief Executive Maurice Levy told journalists on Wednesday.

"With negative organic growth there is a risk of margin erosion but we should be able to maintain the gap with our rivals," he added.

Publicis shares opened higher on Wednesday and by 0704 GMT were trading up 2.46 percent at 21.85 euros.

Earlier this month, media agency ZenithOptimedia, which is owned by Publicis, predicted that global advertising spending was set to fall 6.9 percent this year.

With net new business of $1.7 billion in the first quarter and a month of April slated to be "highly satisfactory", Publicis expects to show better resilience than most of its rivals in the second quarter.

"The second quarter is expected to be even worse than the first. As for us, we do not give a guidance but we have a very strong feeling that we should do better than the market because the pipeline of new business is very good," Levy said.

Commenting on the outlook for the global ad market, Levy added: "Indicators show that the low point should be this summer, with the second half still negative but less negative than the first."

A market recovery was expected in the summer of 2010, around the second or the third quarter, he added.

Publicis, which competes with domestic rival Havas (EURC.PA) and U.S. giant Omnicom Group Inc (OMC.N), posted first-quarter sales of 1.08 billion euros ($1.41 billion), a reported rise of 1.3 percent but a 4.4 percent decline on an underlying basis.

In spite of the tough economic climate, Publicis fared better than its rivals and better than the 5-5.5 percent decline in underlying sales analysts had anticipated, Levy said.

The company, whose clients include Swiss food group Nestle (NESN.VX) and oil major Total (TOTF.PA), was able to gain market shares in the quarter.

Growth in digital activities, notably in the United States, and in emerging markets also helped limit the impact of the economic downturn, he said.

WPP (WPP.L), the world's largest ad group by revenue, said on Tuesday it would not meet its full-year forecasts after first-quarter like-for-like sales fell 5.8 percent.

Omnicom, the world's top ad group by market value, posted on Monday a 6.6 percent drop in underlying first-quarter sales.

Digital activities alone made up 20.5 percent of Publicis' revenue compared with 17.6 percent a year earlier. The digital business had quarterly underlying growth of 9.8 percent.

Publicis also benefited from a well diversified client portfolio with over 50 percent showing growth.

The car sector, however, showed a sales decline of nearly 20 percent at constant exchange rates in the quarter. It represented 13 percent of revenue.

Growing sectors such as Fast Moving Consumer Goods (FMCG) accounted for 39 percent of the group's revenue.

Publicis will continue to look for acquisition opportunities in the digital sector and in emerging markets, Levy said.

"There are many opportunities. We are looking but we are cautious," he said. ($1=.7683 Euro) (Editing by James Regan and Simon Jessop)