* FY17 net profit falls 69.2 pct
* Crown arrests in China hit international business
* Firm not considering sale of struggling Darwin casino - CEO (Recasts, adds market reaction, CEO comment)
By Charlotte Greenfield
WELLINGTON, Aug 9 (Reuters) - The arrests of Crown Resorts Ltd CWN.AX staff for gambling crimes in China had a "massive" effect on New Zealand casino operator Sky City Entertainment Group's SKC.NZ international business, Chief Executive Graeme Stephens said on Wednesday.
Sky City's international turnover slumped 30 percent and net profit tumbled 69.2 percent in the year to June 30, the company said in its full-year results, sending its shares down about 4 percent to a four-month low of NZ$3.90.
Although the international unit accounted for only about six percent of Sky City's total business - down from 10 percent the previous year - Stephens said it was a priority.
"It was providing the cream to our results over the last couple of years," he told Reuters in a phone interview.
"A decent performance adds a couple of percent to your earnings and that's what we're shy of."
Sky City posted a NZ$44.9 million ($32.86 million) net profit for the 2017 financial year, compared with NZ$145.7 million the previous year.
International business turnover fell to NZ$8.7 billion as Chinese big-spenders stayed away from Sky's gaming tables in Australia and New Zealand in the wake of crackdowns by Beijing on capital outflows and casino marketing in mainland China, where gambling is illegal.
A Chinese court jailed 16 employees of Australia's Crown Resorts in June for illegally marketing its casinos to VIP players in mainland China, prompting the company to reverse course on ambitious overseas expansion plans. CHARGE
Sky City's profit was also weighed down by a previously announced A$95 million impairment charge for the reduced goodwill of its Darwin casino in northern Australia after the local government relaxed gaming laws, increasing competition.
Sky City said it was reviewing the future of the casino, but Stephens told Reuters a sale was not currently on the cards.
The company was first considering ways to add value to the operation, and an announcement would be made within six months.
Stephens said he expected "modest growth" in the year ahead as the impact of the Darwin impairment waned, New Zealand growth continued and pressures on the international business eased.
The firm announced a final dividend of 10 NZ cents per share, taking the total dividend for the 2017 financial year to 20 NZ cents, down slightly from 21 NZ cents in 2016.
($1 = 1.3663 New Zealand dollars)