May 13 (Bloomberg) -- Sky City Entertainment Group Ltd., New Zealand's biggest casino company, may post a decline in second- half profit because of a greater-than-expected impact from a smoking ban and government rules to control gambling.

Second-half net income may be NZ$42.9 million ($31 million) to NZ$45.9 million, based on the company's revised forecast range for full-year earnings, which it cut by 13 percent today. Second- half profit was $45 million in 2004. The company's stock had the biggest decline in almost five years.

The impact of New Zealand's anti-smoking law, which forbids smoking in bars, restaurants and casinos, ``is now assessed as potentially greater than was originally predicted,'' the Auckland- based company said in a statement today

As well as the smoking ban, Sky City's earnings have been eroded by the government's imposition last year of stricter rules on gaming operators in an attempt to curb problem gambling. Changes, including restrictions on the value of bank notes used in slot machines, cut about NZ$7 million from Sky City's earnings last year.

Shares of Sky City fell 25 cents, or 5.8 percent, to NZ$4.08, bringing their slide this year to 24 percent, while the benchmark NZSX 50 Index fell 4.3 percent.

Full-year earnings may be NZ$100 million to NZ$103 million, fro NZ$100 million a year earlier, the company said today. In February it forecast a range of NZ$114 million to NZ$119 million.

Sky City said delays in introducing ticketing technology that allows its slot machines to accept higher-value tickets instead of bank notes, and delays in the first stage of redeveloping its Adelaide, Australia casino also hurt earnings.

Gambling losses in the year ended June 30, 2004, probably exceeded NZ$2 billion, according to government figures.

To contact the reporter on this story: Jonathan Underhill in Wellington at o junderhill@bloomberg.net.

Last Updated: May 12, 2005 18:11 EDT